Guide to contracting

in global markets
Contents
Introduction1
Australia3
Introduction
Brazil7 As contractors continue to look beyond
Canada11 their domestic, often mature, markets for
China15 growth opportunities they face an almost
France19 overwhelming choice in terms of which
Greece23 markets to consider, the legal requirements
Hong Kong 27 and implications of operating in each market
India31 and the advantages and disadvantages
Indonesia35 of each.
Kingdom of Saudi Arabia 39
Libya43 This guide aims to offer a high level review –
Mongolia47 by countries and regions in which Clyde & Co
Nigeria51 routinely act – of key legal issues to consider
Qatar55 when contracting in these markets. We hope
Russia59 that you find this to be a useful reference
Singapore63 tool. If you have any questions, or would
Spain67 like to speak with a member of our global
Tanzania71 projects & construction group, then please
Turkey75 do contact us.
United Arab Emirates 79
United Kingdom 83
United States of America 87
Key contacts 92
Our global projects & construction group 94


John Morris
Global Head of Projects & Construction
Clyde & Co
E: john.morris@clydeco.com
or infrastructure@clydeco.com

1
 Construction pipeline
Energy infrastructure
Australia
• Gorgon LNG Project, Western Australia “The [Australian government] will ensure better infrastructure coordination and
(Ongoing - completion due 2014) planning by tasking Infrastructure Australia with developing a 15-year pipeline
• Roy Hill Project, Western Australia of priority major infrastructure projects, to be revised every five years based on
(2013-2015) national, state and local infrastructure priorities.”1
• Wheatstone LNG Project, Western Australia - The Coalition’s Policy to Deliver the Infrastructure for the 21st Century
(2011-2016)
• Ichthys LNG, Northern Territory
Key industry bodies
(2012-2016)
• Master Builders Australia (MBA)
• Prelude floating LNG, Western Australia
(2013-2016) • Property Council of Australia (PCA)
Transport infrastructure • Australian Constructors Association (ACA)
• New Generation Rolling Stock Maintenance • The Royal Australian Institute of Architects (RAIA)
Facilities, Queensland • Engineers Australia (EA)
(2013-2018)
• The Resources and Energy Law Association (AMPLA)
• North West Rail Link, New South Wales
(2014-2019) Market facts
• CBD and South East Light Rail, New South Wales • AUD 324.9 billion construction industry income in 20122
(2014-2020)
• AUD 86.6 billion of capital expenditure from Australian mining in 20122
• Melbourne Metro, Victoria
(Announced - completion due 2022) • Nine ongoing construction PPP projects (as at July 2012)3
• Westconnex Motorway, New South Wales • AUD 82.9-91.2 billion of PPP projects on the government ‘priority list’4
(2015-2023)
Social infrastructure
• Sydney International Convention, Exhibition and
Entertainment Precinct, New South Wales
(2013-2016)
• New Bendigo Hospital, Victoria
(2013-2016)
• Ravenhall Prison Project, Victoria
(Announced - completion due 2017)
• Queensland Schools Project, Queensland
(Announced - completion due 2017)
• New Perth Stadium, Western Australia
(2015-2018)

1 The Coalition’s Policy to Deliver the Infrastructure for the 21st Century, September 2013
2 Industry Overview, Australian Bureau of Statistics, 2011-2012
3 PPP Projects in the Market, Infrastructure Australia
4 Infrastructure Priority List, Infrastructure Australia, July 2013

2 3
 Construction
Contractual issues
–– Common forms of contract procurement include:
–– Traditional (construct only)
–– Design and construct
–– Project management
–– Each Australian State and Territory has its own statutory
jurisdiction with different courts and legislation
–– Standards Australia (AS) standard form contracts are
widely used but often subject to amendments. They
are intended to spread risk evenly between principal
and contractor
–– Time bars are relatively common. These clauses require
the contractor to do certain things within a particular
time - failing which any entitlement is lost
–– ‘Pay when paid’ and ‘pay if paid’ clauses are generally
void. These clauses make payment to the contractor
contingent upon a related payment being made to the
principal or a third party
–– Generally, liability may be excluded or limited - exclusions
of consequential loss and overall caps on liability are
relatively common. There are some constraints on
excluding liability which apply in various Australian
jurisdictions (e.g. liability in respect of ‘misleading and
deceptive’ conduct)
–– Liquidated damages (LDs) are often included for
contractor delays but are only enforceable if a genuine
pre-estimate of loss. Principal delays are typically
addressed by granting the contractor an entitlement to
an extension of time (EOT) and/or additional payment for
defined compensation events
4 5
Key legislation
–– Security of payment legislation
Legislation passed in each Australian State and Territory,
which primarily ensures that any person who undertakes
to carry out construction work (or supply related goods
and services) under a construction contract is entitled
to receive and is able to recover, progress payments in
relation to the carrying out of that work and the supplying
of those goods and services
–– Business industry legislation, codes and standards
The Australian building and construction industry is
governed by a multitude of acts and regulations dealing
with building services, as well as various codes and
standards, such as the National Construction Code,
the Building Code of Australia, or Australian Standards
(Standards Australia provide an industry standard suite
of construction contracts in Australia)
–– Civil liability legislation
Each Australian State and Territory has passed its own
proportionate liability legislation, whereby liability for
loss is to be apportioned between concurrent wrongdoers
according to their respective responsibility for the loss
(the risk of a wrongdoer’s insolvency or disappearance
falls on the plaintiff). Western Australia, New South
Wales and Tasmania allow parties to contract out of
the legislation, whereas contracting out is prohibited in
Queensland. Victoria, South Australia and Australia’s
Capital Territory (ACT) are silent on whether contracting
out is permitted
Insurance
–– Common types of insurance required under contract
include:
–– All risks insurance: damage to works and site materials
–– Professional indemnity insurance: where the contractor
has design responsibility, standard AS contracts require
the contractor to effect and maintain professional
indemnity insurance with minimum cover
–– Public liability insurance: damage, injury and death to
third parties
–– Product liability insurance: damage and injury arising
from products incorporated within the contract works
PFI/PPP
Contractual issues
–– PPPs generally incorporate a design and construct
procurement model, usually using a bespoke form of
contract negotiated between the employer and contractor
–– Site risk is normally assumed by the contractor,
particularly if an existing build on-site prevents
thorough investigation before the contract is let.
However, compensation event provisions may entitle
the contractor to additional payment and/or additional
time to complete works
–– Legislation change risk is usually only allocated to
the contractor if it adversely affects the way works are
carried out
–– Third party risk, such as planning or industrial action,
is usually negotiated
–– PPP construction contracts are generally subject to the
same legislative and regulatory requirements as non-PPP
construction contracts
Key legislation
–– National PPP Guidelines, Policy Framework,
December 2008
Australian government (and Infrastructure Australia)
guidelines to promote PPPs in Australia, including
minimising transaction costs, removal of disincentives
to participation and a stronger pipeline of PPP projects
by ensuring only best-suited projects are considered
for PPP delivery5
Insurance
–– Construction phase: contractor is expected to carry
insurance in accordance with industry practice
–– Operational phase: property damage, business
interruption and third party public and product liability
insurance is generally required
5 National Public Private Partnership Policy Framework, Infrastructure
Australia, December 2008
 Construction pipeline
Energy infrastructure
• Jaraguá Naval – modules manufacture and platform
maintenance in the shipbuilding/offshore sectors,
Port of Maceio
(Announced - dates pending)
• Sanitary Sewerage System, Salvador
(Announced - dates pending)
• Construction of storage dam/water supply
systems, Bahia
(Announced - dates pending)
• Shipyard EISA Alagoas S/A
(Announced - dates pending)
• Naval Industry Hub of the State of Amazonas
(Announced - dates pending)
Transport infrastructure
• Porto Maravilha Project, Rio de Janeiro
(Ongoing - completion due 2015)
• Fortaleza Metro East Line Expansion Project
(Announced - completion due 2019)
• Passenger Railroad (Trem Pé Vermelho) connecting
Londrina to Maringa, Northern Paraná
(2014-2034)
• Easing of congestion at Santos’ port (Embraport)
(Announced - dates pending)
• Airport City ‘Brasilia International Airport’
(Announced - dates pending)
Social infrastructure
• National low-income housing program to provide
2.5 million homes nationwide
(2009-2014)
• Wastewater Plant, Piracicaba
(Announced - dates pending)
• ‘Growth Acceleration Programme’ initiative expected
to increase the number of public concessions and PPPs,
facilitating the participation of foreign and national
private investors in a large range of infrastructure
projects
6 7
Brazil
“[An] important factor in the quality of spending is an increase in levels of
investment in terms of overhead. Public investment is essential in leveraging
private investment and as a regional development tool.
By means of the Growth Acceleration Program and the ‘My House, My Life’
Program, we will continue to keep investment under the strict and careful
scrutiny of the Presidency of the Republic and the Ministries.
The Growth Acceleration Program will continue to be an instrument that
brings together government action and voluntary coordination of structural
investments made by the states and municipalities. It will also be the vector that
gives an incentive to private investment, valuing all the initiatives to constitute
long-term private funds.
In their turn, the investments expected for the World Cup and the Olympics will
be made in such a way as to achieve permanent gains in quality of life for those
in all the regions involved.”1
- President Dilma Vana Rousseff, January 2011
Key industry bodies
• Brazilian Association Base Infrastructure and Industry (ABDIB)
• Brazilian Metal Construction Association
• Brazilian Studies and Projects Financing Company (FINEP)
• Institute of Architects of Brazil
• National Syndicate of Architecture & Engineering
• Brazilian Agency for Industrial Development (ABDI)
• National Department of Transport Infrastructure (DNIT)
• Ministry of Development, Industry and Foreign Trade (MDIC)
• Brazilian Association of Industrial Engineering (ABEMI)
Market facts
• Construction spending expected to increase at a 7% compound
annual growth rate over the next five years2
• USD 526 billion estimated investment as part of second phase of
‘Growth Acceleration Program’ (PAC 2) between 2011-2014
• USD 133 billion of road and railway infrastructure investment
between 2012-2017
• USD 9.1 billion in active PFI projects financed by the International Bank
for Reconstruction and Development (IBRD) (as at September 2013)
• USD 14.4 billion in Rio as a result of 2016 Olympic Games - expected to have
significant impact on future infrastructure and economic development
1 President Dilma Vana Rousseff Inauguration speech, Embassy of Brazil in London, January 2011
2 A Brighter Outlook - International Construction Cost Survey, Turner & Townsend, 2013
 Construction
Contractual issues
–– Common contractual or procurement structures include:
–– Design bid build (DBB)
–– Engineering, procurement and construction
management (EPCM)
–– Engineering, procurement and construction (EPC)
–– Alliance (the use of which has recently increased-
notably in the case of more complex projects with
particular financing challenges)
–– Commonly used corporate forms in Brazil include:
–– Limited liability company (sociedade limitada) (LLC)
–– Joint stock company (sociedade anonima)
–– In both types of company, the responsibility of the
project partners is limited in relation to the company
and third parties
–– In major civil engineering projects, the contractual
structures are often simple, with the client engaging
a major contractor, which then subcontracts with its
supply chain
–– However, major contractors may form unincorporated
joint ventures to undertake larger schemes (assuming
joint and several liability to their client, and allocating
responsibilities between themselves through a joint
venture agreement)
–– If a special purpose vehicle (SPV) is used, losses at one
location can be offset against gains at another, in a
consolidated tax filing. Upstream ownership of private
corporations can generally remain confidential, but
public land records must identify the owning entities.
The choice of SPV affects the type of collateral demanded
(for example, parent guarantees for corporations or
personal guarantees for LLCs)
–– A consortium can also be used to facilitate the
development of joint projects without actually
incorporating a regular company. In principle, companies
which take part in a consortium have no joint liability
and each one is severally liable for the obligations
incurred by them, unless the consortium agreement
expressly states otherwise
8 9
Legislation
–– Law No 4.864, of 29 November 1965
Establishes provisions to stimulate the construction
industry
–– Brazilian Civil Code, 2002 (Articles 610 - 626)
Regulates the rights and liabilities in relation to
constructions contracts
–– Federal Law No 5,869/1973 (Brazilian Code of
Civil Procedure)
Construction disputes are governed by this principal
form of legislation governing all civil disputes
–– Federal Law No 6,514/77
Primary instrument regulating occupational health and
safety standards
–– Administrative Norm No 3,214/78 (known as Normas
Regulamentadoras (NRs))
Health and safety legislation issued by the Ministry
of Labour establishing programmes for medical control
of occupational health
Insurance
Compulsory insurance
Mandatory insurance for construction projects includes:
–– Insurance for personal injury
–– Insurance for buildings divided into independent units
–– Insurance bond securing payment of the civil
construction debtor, including the real estate obligation
Non-compulsory insurance
–– Common practice for contractors to provide performance
security in relation to their contractual obligations
–– The contractor (and often subcontractors and suppliers,
as well as, to a lesser extent, consultants) is often
contractually required to take out the following insurance
for a construction project:
–– Life and personal accident insurance for employees
–– A performance bond
–– Civil liability risk insurance
–– Engineering risk insurance
–– In international projects, contractor performance is
usually guaranteed by either a standby letter of credit
or bank guarantee
PFI/PPP
Contractual issues
Other considerations
–– In PPP agreements, the Public Administration creates
PPP
guarantees to assure the payment of a government
subsidy to private parties; the agreement’s value needs –– Revived interest in PPPs and infrastructure in general - as
Brazil prepares for the World Cup in 2014 and Olympic
to be at least BRL 20 million (USD 11.7 million) and the
and Paralympic Games in 2016
execution period must be at least five years
–– PPP agreements cannot be entered into with the sole –– On a microeconomic level, Brazilian companies need
purpose of executing public works, supply of workers or improved infrastructure to allow them to develop, while
installation and supply of equipment on a macro level, it is a means to re-balancing growth and
increasing the level of investment in the economy
Legislation
–– Brazilian growth is therefore not only driven by
–– Federal Law No. 11,079/2004 (‘the PPP Law’) consumption, but investment too. A large percentage of
Sets forth general rules about PPPs, which, under Article
this investment has traditionally been contributed by The
2, were introduced as (i) sponsored concession agreements Brazilian Development Bank (BNDES), which in 2011 lent
and (ii) administrative concession agreements
more to infrastructure (40%) than it did to ‘industry’ (32%)
–– Federal Law No. 8,987/1995 –– In the short-to-medium term, international project finance
Regulates sponsored concessions, which are ordinary
lenders will struggle to compete with the terms BNDES
concession of public services and public works where
can offer in lending long-term to national infrastructure
there are government subsidies plus tariffs charged for
as the difference between the long-term interest rate and
consumers
policy rate stands at around 200 basis points – with BNDES
charging 5.5% and the base rate at 7.5%
–– (1) Article 37 of Federal Constitution and (2) Federal
Law 8,666/1993 –– The ports sector has historically suffered a great deal
Applicable to public procurement/bid procedures: of under-investment which has been detrimental to
(1) criteria of legality, impersonality, morality and Brazilian economic growth
publicity; and (2) criteria, inter alia, of principles of –– Embraport is an exception to the rule as it included both
equality, compliance with the bidding prospectus, commercial and BNDES funding - setting an example for
objective awarding and formal procedure
future port deals in the market
–– Federal Law No. 12,462/2011 Construction
Facilitated catalysing of public procurements –– Brazil is not forced to rely on international developers to
necessary for recent/upcoming sporting events through realise its infrastructure ambitions, as it already boasts
Special Regime for Public Procurements (RDC), namely world-class construction companies. However, as with
exclusively: BNDES playing such a central role in infrastructure
–– 2013 FIFA Confederations Cup financing, there is a danger that such a scenario may
recur in relation to its construction. Going forward,
–– 2014 FIFA World Cup
international investors are perceived as key if Brazil hopes
–– 2016 Olympic and Paralympic Games
to keep up with rising demand
–– Construction of infrastructure and provision of services
at airports located within 350 km of cities serving as
host venues for the World Cup
Insurance
–– Brazilian insurance market is closed to foreign players,
meaning that only Brazilian companies, which must
be duly licensed by the Superintendência de Seguros
Privados (SUSEP), can operate in this market
–– Local players, however, can be fully owned by foreign
companies. Although brokers are the parties duly
authorised to intermediate the contractual relationship
between the (re)insurer and the (re)insured, their
presence is not compulsory
 Construction pipeline Canada
Energy infrastructure
“The global economy is changing. Competition for the brightest minds is
• Southeast Collector Trunk Sewer Project, Ontario
(2011-2015) intensifying. The pace of technological change is creating new opportunities
• Labrador Island Transmission Link, Newfoundland
while making older business practices obsolete. Canada’s long-term economic
& Labrador competitiveness in the knowledge economy demands globally competitive
(2013-2016) businesses that innovate and create high-quality jobs.
• Romaine Complex, Quebec New construction and infrastructure projects are key enablers for economic
(2009-2020) growth and job creation. Investments will focus on projects that promote
• Site C Clean Energy Project, British Columbia productivity and economic growth, such as highways and public transit, and
(2013-2020) are designed to capitalize on innovative approaches, such as public-private
• Athabasca Oil Pipeline Twinning, Alberta partnerships.”1
(Announced - dates pending)
- Creating a New Building Canada Plan, September 2013
Transport infrastructure
• Calgary International Airport Developments,
Calgary, Alberta
Key industry bodies
(2012-2015) • Canadian Construction Association (CCA)
• Turcot Interchange, Montreal, Quebec • Association of Consulting Engineering Companies (ACEC)
(2012-2018) • Canadian Construction Documents Committee (CCDC)
• Eglinton Crosstown Light Rail Transit, Toronto, Ontario • Royal Architectural Institute of Canada (RAIC)
(2011-2020)
• Construction Specifications Canada (CSC)
Social infrastructure
• Engineering Institute of Canada (EIC)
• Windsor South West Detention Centre, Ontario
(2011-2014) Market facts
• McGill University Health Center, Montreal, Quebec • Construction industry accounts for more than 12% of Canada’s gross
(2010-2015) domestic product (GDP) and maintains and repairs CAD 2.9 trillion
• Multifunctional Amphitheater, Quebec City, Quebec in assets2
(2011-2015)
• CAD 53 billion in federal support proposed under Economic Action Plan
• Women’s College Hospital Redevelopment,
2013, including over CAD 47 billion in new funding over 10 years (starting
Toronto, Ontario
in 2014-15) for provincial, territorial and municipal infrastructure
(2010-2016)
projects3
• 205 construction PPP projects (as at September 2013)4
• CAD 398.2 billion of investment in construction, machinery and
equipment in 20135
• CAD 1.25 billion to continue supporting infrastructure projects
through PPPs6
• CAD 32.2 billion under a 10 year ‘Community Improvement Fund’
to build roads, public transit, recreational facilities and other
community infrastructure7

1 Creating a New Building Canada Plan, September 2013

2 Build Force Canada, Government of Canada
3 Budget Plan 2013 - Chapter 3.3: The New Building Canada Plan, Government of Canada
4 Canadian PPP Project Database, The Canadian Council for Public-Private Partnerships
5 Private and Public investment in 2013, Statistics Canada, February 2013
6 Canada’s Economic Action Plan 2013: The New Building Canada Plan, Government of Canada
7 Budget Plan 2013 - Chapter 3.3: The New Building Canada Plan, Government of Canada

10 11
 Construction
Contractual issues
–– Standard form contracts provided by the Canadian
Construction Documents Committee are often adopted
and modified
–– Common forms of standard contracts include:
–– Design build stipulated price contract
–– Design builder/consultant contract
–– Stipulated price contract
–– Construction management contract
–– Unit price contract
–– Civil works contract
–– Contracts are governed by the laws of each of the
10 provinces
–– Quebec civil law regime is distinct from the rest of
Canada’s common law system. Quebec courts look to
the Civil Code as the source of law whereas courts in the
common law provinces refer to judicial precedent in the
absence of a statutory regime
–– Quebec Civil Code contains provisions unique to Quebec,
e.g. presumption of liability of the contractor, architect
and engineer for loss of immovable work in first five years
after completion (art. 2118 C.C.Q.)
–– Construction liens/immovable hypothecs are also a
matter of provincial jurisdiction with each province
determining the terms and conditions
12
Legislation
–– The provinces and municipalities have adopted laws
and regulations governing the quality of construction
work and public safety – from design through to
completion and beyond
–– Quebec has enacted a Construction Code and a Safety
Code pursuant to the Building Act, L.R.Q., c. b-1.1,
specifying requirements for engineers, architects,
contractors and other parties to a construction contract
–– Ontario has enacted a Building Code pursuant to the
Building Code Act, S.O. 1992, c. 23
–– Legislation to protect and compensate construction
workers for bodily injuries also enacted. Promotes
health and safety and creates a series of no-fault
regimes featuring a public insurance scheme covering
work accidents funded by employers:
–– Occupational Health and Safety Act, R.S.O. 1990,
c. O.1 (Ontario)
–– Workers’ Compensation Act, R.S.O, 1990, c. W.11
(Ontario)
–– An Act respecting occupational health and safety,
R.S.Q., c. S-2.1 (Quebec)
–– An Act respecting industrial accidents and occupational
diseases, R.S.Q., c. A-3.001 (Quebec)
Insurance
Common types of insurance issued for construction projects:
–– Commercial general liability insurance (“wrap-up”
if issued for a single project): protects insured against
liability for damage to third party property and bodily
injury to third parties
–– Builder’s risk insurance: first party property insurance
covering damage to property in the course of construction
–– Pollution insurance: first party coverage for cleanup costs;
third party liability insurance for pollution conditions
–– Professional liability insurance: protects construction
professionals against liability for third party claims
PFI/PPP
Contractual issues Legislation
–– Different PPP models can be used8: –– Canada Strategic Infrastructure Fund Act, S.C. 2002, c. 9
–– Design build Establishes a program to provide contributions for the
carrying out of strategic infrastructure projects
–– Finance only
Numerous provincial and municipal laws and regulations
–– Operation & maintenance
also contain provisions on PPP, for example:
–– Design build finance maintain
–– An Act respecting Infrastructure Québec, S.Q. 2009,
–– Design build finance maintain operate
c. 53 (Quebec)
–– Concession
–– Ontario Infrastructure and Lands Corporation Act,
–– Payment upon delivery: the private entity is paid only S.O. 2011, c. 9, Sched. 32 (Ontario)
when construction is completed. The addition of output- –– Health Sector Partnerships Agreement Act, S.B.C. 2003,
based obligations and payment upon delivery creates a c. 93 (British Columbia)
performance-based contract
Insurance
–– These are long-term contracts of two or more phases
–– Construction phase: contractor is expected to procure
that usually cover a large part of the useful economic life
insurance covering all parties involved in accordance with
of the asset
industry practice, e.g. builder’s risk insurance, wrap-up
–– The adoption of PPP friendly legislation by Canadian liability insurance, contractors pollution insurance, single
provincial and municipal governments in recent years project professional liability insurance, etc
demonstrates the increased political will to create suitable
–– Operational phase: parties should procure, inter alia,
policies for the development and implementation of
complex, large-scale construction projects all risks property and business interruption insurance,
commercial general liability insurance and pollution
–– The Canadian PPP market has seen an increasing range insurance as required
of projects over the past few years, including waste
management, rapid transit and road infrastructure
–– Throughout the 2008-09 financial crisis, projects were still
able to attract financing as both the public and private
sectors took measures to address the negative impact of
the economic downturn. These included bond financing
to transfer the risk of long-term lifecycle costs as well
as increased government capital contributions at the
substantial completion stage to help reduce long-term
debt. Some measures that were adopted during the crisis
are still in force today and continue to play a role in
fostering the growth of the PPP market
–– Over the past few years, infrastructure debt funds
have been created as an alternative method to finance
infrastructure and energy projects
–– With an estimated CAD 400 billion investment in
infrastructure upgrades over the next decade, the
measures taken to stimulate the Canadian PPP
market have proved to be an effective stimulus to the
construction industry
8 Models of Public-Private Partnerships, The Canadian Council for Public-Private Partnerships
13
 Construction pipeline
Energy infrastructure
China
• Central Asia-China Gas Pipeline, Turkmenistan- The government is committed towards long term prosperity for
Uzbekistan-Kazakhstan to China the entire nation.
(2014-2015)
China’s 12th five-year plan for 2011-2016 aims at higher quality growth1.
• Xiluodu hydropower station, Southwestern Yunnan It has plans to not only have breakthroughs in emerging industries
and Sichuan
(2005-2018)
but plans for building and energy infrastructures. The government
• Zhundong Coalfield, Xinjiang
is dedicated to pursuing a “new industrialization path with Chinese
(2013 - completion date pending) characteristics”2. Amongst other things, one of the focuses of the
government is the strengthening of the energy and transport system.
Transport infrastructure
• Airport expansion, Guangzhou Baiyun International The region’s major cities will be brought closer with the expansion of
Airport airports, highways and railways and the construction of international
(2012-2014) passageways and corridors.
• Lanxin high-speed rail line, Gansu Province-Urumqui
(2009-2015) Key industry bodies
• Chengdu-Chongqing railway, Neijiang • Ministry of Construction (MC)
(2012-2015)
• State Planning Commission (SPC)
• Third West-East Gas Pipeline Project (WEPP 3), Xinjiang
(2012-2015) • State Administration for the Building Materials Industry (SABMI)
• Airport Development, Daxing District, Beijing • State Reform Commission (SRC)
(2014-2018) • Ministry of Foreign Economic Relations and Trade (MOFERT)
Social infrastructure • China Construction Association
• 36 million social housing units to be built on a
national scale
Market facts
(2011-2015) • RMB 100 trillion total investment in construction in 20123
• Total output value of construction to reach RMB 19,456 billion by 20153
• 6.7% of GDP in 2012 attributed to the construction industry4
• 33 PFI projects of USD 2,363 million in 20125

1 The 12th five-year plan: China’s Scientific and Peaceful Development, speech by H.E. Ambassador Liu Xiaoming, Royal
Institute of International Affairs, March 2011
2 Report on the work of the Government, Chinese Government Official Web Portal, 2011
3 The construction sector in China, The EU SME Centre, 2011
4 McKinsey, March 2012 and China Statistical Yearbook & July/August 2012 International Construction Magazine
5 Private Participation in Infrastructure Projects Database, The World Bank Group, December 2013

14 15
 Construction
Contractual issues
–– Standard form contracts commonly used include:
–– GF-2013-0201 jointly issued by the State
Administration for Industry and Commerce and
the Ministry of Housing and Urban Rural Development
in 2013
–– Standard Documents for Preliminary Assessment
of Qualifications for Tendering of Construction
Projects and the Standard Documents for Tendering
of Construction Projects, issued by the State
Development and Reform Commission and eight other
ministries and commissions in 2007
–– FIDIC standard forms of contract
–– Use of the standard-contract forms is now mandatory
under the newly adopted Regulation for the
Implementation of Law on Bid Invitation and Tendering
–– Liability for party sustaining injury or property damage
due to quality defects continues after the normal period
of time to correct defects
–– Contractor has a statutory right to compensation for
losses and expenditure resulting from delay attributable
to the owner
–– The amount of liquidated damages may be adjusted to
bring the amount closer to the actual amount loss
–– Liability can be excluded but Chinese law prohibits
exclusion of liability for bodily or personal injury, liability
for loss of assets or damage if incurred deliberately or due
to gross negligence
16
Legislation
–– Construction Law of the People’s Republic of China
(as amended by the Standing Committee of the
National People’s Congress 2011)
Amended and published on 22 April 2011 - provides
construction workers with strengthened rights in relation
to insurance and safety issues
–– Real right law (2007)
Providing property owners with various rights when
carrying out construction projects in China
–– Work safety law (2002)
Outlines general safety legal requirements on
construction sites
Insurance
–– Common types of insurance include:
–– All risks insurance: damage to the project itself
–– Construction equipment insurance: damage to
construction equipment and tools arising from natural
disasters and accidents
–– Installation works all risks insurance: losses and third-
party liability caused by risks during the installation or
adjustment of machinery and equipment
–– Third-party liability insurance: injuries to a third party
–– Construction quality guarantee insurance: losses
arising from construction defects during the
warranty period
–– Industrial injury insurance: injuries to workers
PFI/PPP
Contractual issues
–– An off-take contract with the government is
commonly signed to ensure the income flow during
the operation period
–– Investors and contractors need to rely on published
policies/law/regulations and written contracts over
oral promises
–– Contract terms and conditions should be standardized
where possible
Legislation
–– Currently no unified legislation on concessions
–– Local rules, regulations and ministerial decisions
govern contracts
–– In 2010, the State Council published Certain Opinions
on Encouraging and Guiding the Healthy Development
of Private Investment (the ‘New 36 Opinions’). The New
36 Opinions are supported by detailed implementation
measures issued by the State Council in June 2012, which
serve as a regulatory framework for private investment
Current market position
With the increasing needs of infrastructure placing
monetary pressure on the government, the need for
PPP/PFI is increasing.
The use of PPP/PFI in China is expected to grow,
however there are many risks associated with these
projects in China and enforcement risk is high. As
such, private investors cannot rely on these contracts
to mitigate risks. Parties must be aware of any
political, economic and force majeure risks that may
affect the project.
The government has shown a positive attitude
to encourage and support the use of PPP in China
by publishing regulations which promote private
investment. With the changes expected and the
attitude moving towards international contractual
practices, it is forecasted that the use of PPP/PFI will
increase in the future.
17
 w

Construction pipeline
Energy infrastructure
France
• France-Spain Interconnection Project (INELFE) - Baixas, The French Government is encouraging the acceleration of
(France) to Santa Llogaia (Spain) construction projects, particularly in response to the housing crisis,
(2010-2014) whilst still trying to preserve natural areas and resources1.
• Biomass to Liquid Project, Strasbourg Parliament is currently discussing a bill aimed at assisting contractors
(Ongoing - completion due 2015)
to overcome frequently encountered obstacles. The bill will aim to:
Transport infrastructure
• CDG Express, Paris ––Establish an integrated procedure for housing projects, which will
(Ongoing - completion due 2016) bring together all mandatory authorization procedures required for a
• LGV Est Européen Phase 2, Nancy/Metz-Strasbourg single project
(Ongoing - completion due 2020) ––Promote the transformation of offices into housing
• The Roissy-Picardy railway link ––Reduce the duration of court proceedings and address unjustified
(Ongoing - completion due 2020)
appeals against construction projects
• Extension of RER E, Paris
(2014-2020) ––Increase the maximum level of loan guarantees that local
• The South Interconnection, Orly governments can make to facilitate the financing of projects -
(2020-2025) facilitate cash management within construction companies
Social infrastructure ––Create a national website to improve access to planning documents
• Construction of 650 social housing units, Toulouse
(2011-2015) Key industry bodies
• Construction of 150,000 new social housing units • Fédération Française du Bâtiment (FFB)
and renovation of 12,0000 units per year • Fédération Nationale des Travaux Publics (FNTP)
(2013-2015)
• Confédération de l’Artisanat et des Petites Entreprises du Bâtiment (CAPEB)
• Lutterbach Prison, Alsace
(2015 - completion due 2017-2018) • Syndicat National du Second oeuvre (SNSO)
• Paris-La Santé, Fleury-Mérogis, Baumettes 2, Aix 2 Market facts
prison renovations
(Announced - dates pending) • EUR 130 billion overall value in 2012 2
• 1,167,000 employees: 337,000 construction companies
• Three major players: Vinci, Bouygues, Eiffage

1 Plan d’investissement pour le logement, Ministère de l’Égalité des Territoires et du Logement, March 2013
2 Le bâtiment en chiffres, La Fédération française du Bâtiment, June 2013

18 19
 Construction
Contractual issues
–– Standard forms of contract are often used for
construction agreements, subcontracting and
joint ventures
–– Different approaches apply according to whether
the project falls within the public/administrative or
private domain
–– The main obligations of employers/contractors are
defined in two standard forms:
–– Norm AFNOR n° NF P 03-001 (December 2000) –
commonly used for private construction projects
–– CCAG (‘Cahier des clauses administratives générales’,
or General terms and conditions) – commonly used for
public construction projects
–– Before acceptance of works: contractual liability
(Article 1147 of the Civil Code) as well as liability in
tort (employer/sub-contractors)
–– After acceptance of works: strict decennial liability on
contractors (Articles 1792 and following), as well as
contractual and tort liability, defective products
20
Key legislation
–– Articles 1792 and following of the Civil Code – Article
L.242-1 of the Insurance code
Stipulates obligatory insurance (‘dommage ouvrage’)
to be held by employer before the start of the performance
of any works. The employer’s insurer generally proceeds
directly against the contractor’s insurers particularly
regarding matters where the contractor has strict/
decennial liability
–– Law of 31 December 1975 on subcontracting
Further obligatory legislation to ensure that a sub-
contractor will be paid for its work, either by the
contractor or directly by the employer
Distinct rules apply according to whether the employer is
public or private
–– Law of 31 December 1993 on coordination and health
protection (SPS coordination)
Onerous obligatory coordination obligations on an
employer in circumstances where two or more companies
are to perform works on a site, either simultaneously or
successively and only if there is a risk of accidents to their
employees linked to such co-activity
–– Article 1799-1 of the Civil Code
A private employer must ensure that a bank or other
guarantee is in place covering payments due to its
contractors for all substantial construction projects
–– Article L.160-1 and following of the Environmental Code
Obligatory regulations applying to environmental
damages, especially in cases of pollution
PFI/PPP
Contractual issues
–– PPP contracts or ‘Partnership agreements’ (contrats
de partenariat) were recently introduced into French law,
although other types of PPP i.e. concessions, have been
used by public entities since the Napoleonic era
–– The government has specified a range of matters
that must be addressed in PPP documentation and in
particular the role to be played by public entities
–– An evaluation of the project is mandatory before
implementation
–– Duration of the contract is generally between
20-30 years
Legislation
–– Decree of 17 June 2004
All public entities can adopt PPPs in all sectors. An
evaluation of the project is mandatory before the
execution of a PPP covering complexity, urgency and
financial value
Current market position
Between 2005-2012, several hundred PPPs or
equivalent have been concluded3:
–– 167 PPPs
–– 300 ‘BEAs’ (long term public construction leases)
–– 35 ‘BEHs’ (long term public hospital construction
leases)
–– 12 ‘AOT/LOAs’ (temporary authorisations to occupy
public land with a view of realising projects)
60% of PPPs have a value less than EUR 50 million -
the average value is EUR 26 million for a local project
(i.e. projects led by local state entities such as cities,
departments, regions) and EUR 250 million for state
level projects.
Of the 167 PPPs referred to above, 129 projects were
led by local entities.
EUR 13 billion global value of such projects from
2004-2012 (up from EUR 9 billion as at the end of
2011). PPPs now represent approximately 5 % of
overall annual public investment (EUR 90 billion
per year).
During 2012, 11 projects were launched at national
level covering the defence, railways, education
and health sectors. During the same year, public
local entities (cities, departments, regions) entered
into 26 PPPs, with a total value of EUR 700 million,
with respect to education, roads, sport, and public
equipment projects.3
3 Ministre de l’économie et des finances, Rapport d’activité MAPPP, 2012
21
 Construction pipeline
Energy infrastructure
• Funding for eight ‘key’ energy projects was announced
by the EU Commission in October 2013, including
electricity connection between Greece and Bulgaria, and
between Greece, Cyprus and Israel, and a gas subsea
pipeline between Greece, Cyprus and Israel
• Project Helios - aims to multiply Greek solar power
production from 206 MW in 2010 to 2.2 GW in 2020 and
up to 10 GW by 2050
Transport infrastructure
• In January 2014, work resumed on the motorway
between Athens and Tsakona and between Maliakos
Bay and Kleidi, jointly worth EUR 3.1 billion
• Tender for construction of road projects worth
EUR 243 million
(Announced - dates pending)
• Olympia Odos motorway project
(Ongoing - completion due 2015)
• Moreas Odos motorway project
(Ongoing - completion due 2015)
• Completion of a metro network in the northern
city of Thessaloniki
(Completion currently expected between 2016-17 - over four
years later than planned)
• Expansion of regional ports of Igoumenitsa and Lavrion
(Announced - dates pending)
• Construction of a sea cruise port in Piraeus region
using PPP (Announced - dates pending)
• Tram network extension from Neo Faliro to Piraeus
(Announced - dates pending)
Social infrastructure
• Patras General Hospital Upgrade Project
(Ongoing - completion due 2014)
• Gennadiou Primary School construction Project
(Ongoing - completion due 2014)
22
Greece
The Ministry of Environment, Energy and Climate Change has been
established in order to confront the continuous environmental
problems and to adopt a new development model – the model of green
development – that will secure a better quality of life for every citizen.
The Ministry of Environment, Energy and Climate Change works to
achieve the protection of the natural environment and resources, the
improvement of quality of life, the mitigation and adjustment to the
implications of climate change and the enhancement of mechanisms
and institutions for environmental governance.
The mission of the Ministry of Infrastructure, Transport and Networks is:
––To plan and implement national policy and create the appropriate
institutional framework at European and international level for the
development of top quality transport, mass-transit, telecom and
postal services under conditions of healthy competition
––To contribute to the country’s economic development and to the
improvement of its citizens’ quality of life in the areas falling under
the Ministry’s responsibility
Key industry bodies
• Technical Chamber of Greece
• Association of Greek Architects (Syllogos Architektonon Diplomatouchon
Anotaton Scholon-Panellinia Enosi Architetktonon, SADAS-PEA)
• Association of Civil Engineers of Greece
• Hellenic Association of Mechanical and Electrical Engineers
• Special Secretariat for PPPs
Market facts
• Industry valued at EUR 10.7 billion in 20121
• 8.1% decline in building activity from June 2012 - June 2013 but construction
activity grew in October 2013 for first time in two years2
• Infrastructure construction is the largest market, accounting for 44% of
industry’s total value, with residential construction the second largest
at 27.5%
• EUR 10.5 billion in pipeline priority projects to 2015 (co-financed with EC)
1 Construction in Greece-Key Trends and Opportunities to 2017, RnR Market Research, April 2013
2 Hellenic Statistical Authority, September 2013
23
 Construction
Contractual issues
–– Lump sum traditionally procured contracts are the
norm, although design and build is also popular.
Remeasurement contracts and management contracts
are rarely used
–– Standard-form contracts are not generally used. Contracts
are freely negotiated between the parties on a project-
by-project basis, although these tend to be relatively
unsophisticated, and large projects in the private sector
are on occasion undertaken without a contract at all.
Contracts need not be in writing, and are not generally
subject to formalities, save for where special rules apply
e.g. contracts with public bodies, transfer of property.
Oral contracts are subject to Greek Civil Code provisions
(Art. 681-702)
–– A contract is formed when the parties reach agreement
on the essential terms of a contract type as defined by law
(essentialia negotii) and any point which a party expressly
intended should form part of the contract (accidentalia
negotii). Contract negotiations are to be conducted in
good faith, and contracts are interpreted according to the
requirements of good faith. Claims for breach of contract
may be brought for a period of 20 years from breach
–– Contracts must be in Greek, or translated into Greek,
where the project relates to public construction works
and/or for tax purposes
Legislation
–– Greek Civil Code
Divided into five books, general principles of contracting
are set out in Book I, and construction-specific principles
(including those which govern oral contracts) are set out
in Book II, especially Chapter XIX, Sections 681 to 701.
A number of important terms are implied into contracts
by the Civil Code
–– Greek Criminal Code
Under the Greek criminal code, architects and contractors
may face up to two years in prison if they violate the rules
of construction
24
–– Greek Building Regulations (Law 4014/2011)
Implemented in July 2012, these have introduced a
mandatory requirement for inspection of building works,
and authorised independent inspectors are randomly
assigned to every project to check the construction at
different stages
–– Public Works Act
Governs infrastructure development contracts with
government and the public sector, and will overrule the
Greek Civil Code in cases of conflict
Insurance
–– The contractor is responsible for buying insurance in
all contracts, and it is a prerequisite for obtaining a
construction licence. Contractor All Risk/Erection All Risk
insurance is common, usually project specific. Cover for
contractor’s plant and equipment is given only with the
contract works insurance; cover may form part of the
works policy or be issued separately, depending on the
size of the risk
–– Professional liability cover bought by architects and
engineers will generally depend on contract value, but
EUR 1 million is not unusual. Cover is available either on a
single project or annual basis
PFI/PPP Current market position
Contractual issues
• The Ministry of the Economy and Finance makes
–– Unlike contracts for ordinary construction projects,
the following statement concerning public private
the provisions of PPP contracts are largely governed by
partnerships: “With the implementation of PPPs, a
legislation pursuant to law 3389/2005 as amended (where
new boost will be given to the development of the
applicable), which identifies 25 categories of mandatory
economy, prompt and efficient delivery of necessary
PPP contract provision, including:
infrastructure will be guaranteed, while more public
–– The subject matter of the PPP, specifying the project or funds will be made available for social purposes
service being provided and priorities. PPPs yield important benefits for
–– The time frame for execution and delivery, and all involved stakeholders: the public sector, the
methods of inspection and quality control country’s citizens and the private sector, which
now gains access to a new expanding market.
–– Allocation of risks between the parties and a definition
This is the reason why PPPs are considered an
of events of force majeure. The substantial technical
important reform and a fundamental pillar for the
and financial risks will be borne by the private sector,
development of the country.”
but the public sector is required to provide assistance
and/or compensation in relation to, for example, delays • Although the difficult economic situation in Greece
caused by public authorities such as the Archaeological means most PPP activity has been halted in recent
Service and public utilities. The private sector will years, some major projects (such as motorways),
assume construction and financing risk have now resumed and EU funding for some
significant new energy infrastructure projects has
–– Methods of inspection and quality control
recently been announced.
–– Details of finance arrangements and allocation
of profits
–– The governing law and language of the project and
finance documents is Greek. English is usually adopted
where a second language is used
–– The only accepted method of dispute resolution is
arbitration, which is final and binding
Legislation
–– Law No. 3389/2005 amended by L. 3843/2006,
L.3375/2009, L.3746/2009, L.3840/2010, L.3982/2011 and
L.4013/2011
This is the principal statutory framework for PPP and
PFI contracts in Greece, detailing specific requirements
for PPP contract terms. It only applies to projects with
budgets below EUR 200 million, and therefore will not
apply to major infrastructure projects
Insurance
–– Where L.3389/2005 as amended applies to a PPP contract,
the insurance requirements must be set out in the project
agreement and ancillary documents
–– Insurance for the construction phase is the same as for a
non-PPP project
25
 Construction pipeline
Transport infrastructure
• Guangzhou-Shenzhen-Hong Kong Express rail link
(2010-2015)
• South Island Line of Mass Transit Railway Corporation
(MTRC) (2011-2015)
• Hong Kong-Zhuhai-Macau bridge
(2010-2016)
• Shatin to Central Link of MTRC
(2012 - completion due between 2018-2020)
• Tuen Mun Western Bypass and Tuen Mun Chek
Lap Kok Link
(Announced - dates pending)
• Hong Kong International Airport (HKIA) third runway
(In March 2012, the Government granted the Airport
Authority its in-principle approval to adopt, for planning
purposes, the three-runway system as the future development
direction for the HKIA. The Airport Authority is currently
conducting the Environmental Impact Assessment and
developing associated designs for the three-runway system) 6
Social infrastructure
• West Kowloon Cultural District first phase
(2013-2015)
• Three phase Kai Tak Development Plan
(2009 - completion due in 2013-2016-2021)
• New Development Areas, northern New Territories
(Ongoing - completion due 2019)
26
Hong Kong
“To foster economic development and enhance the quality of life of our people,
we shall continue to plan and take forward infrastructure projects. The
estimated capital works expenditure for 2013-14 exceeds HKD 70 billion. By late
March 2013, our total commitments for capital projects are expected to be
over HKD 310 billion.”1
“The construction industry is currently in a golden age, with major
infrastructural projects reaching their peak construction period. The demand
for manpower is increasing. To help the industry meet the demand, the
government aims to attract and train more local construction workers.”2
- John Tsang, Financial Secretary, February 20131
- Paul Chan, Secretary for Development, May 20132
Key industry bodies
• Hong Kong Construction Industry Council (CIC)
• Hong Kong Construction Association
• Hong Kong Institute of Architects (HKIA)
• Hong Kong Institution of Engineers (HKIE)
• Hong Kong Institute of Surveyors (HKIS)
• Hong Kong Institute of Construction Managers (HKICM)
Market facts
• HKD 145.8 billion and HKD 163 billion of construction expenditure in
the fiscal years 2011-12 and 2012-133
• Public sector construction expenditure and private sector construction
expenditure to reach up to HKD 90 billion respectively in 2013-144
• Up to HKD 1,715 billion total construction expenditure in the next ten
fiscal years between 2013-14 to 2022-235
1 Budget speech by the Financial Secretary, 2013-2014 Budget, February 2013
2 Speech by the Secretary of Development, GovHK, May 2013
3 Construction Expenditure Forecast Information, Hong Kong Construction Industry Council, September 2012
4 Mid-Term Construction Expenditure Forecast, Hong Kong Construction Industry Council, September 2012
5 Mid-Term and Long-Term Construction Expenditure Forecast, Hong Kong Construction Industry Council,
September 2012
6 Three runway system, Hong Kong International Airport
27
 Construction
Contractual issues
–– Common forms of contract procurement include:
–– Traditional
–– Design and build
–– Standard form contracts: the Standard Form of Building
Contract Private Edition (with Quantities published by
the HKIA, HKIS and HKICM) has started to be commonly
used in the private sector. The General Conditions of
Contract for Building Works are used in all government
building contracts
–– Responsibility for design is generally not held by the
contractor under traditional procurement mechanisms
(under design and build arrangements)
–– Liability can be excluded, other than for death or personal
injury, by express wording in the contract
–– Liquidated and ascertained damages (LADs) are often
included for contractor delays but are only enforceable
if the LADs are a genuine pre-estimate of loss. Client
delays are typically addressed by granting the contractor
an entitlement to an extension of time (EOT) and/or
additional payment for defined compensation events
Legislation
–– Buildings Ordinance (Cap 123)
The major legislation for regulating planning, design and
construction of buildings and associated works, rendering
safe dangerous buildings and land, and making provisions
for related matters
–– Electricity Ordinance (Cap 406)
Serves mainly to provide for the registration of electrical
workers, contractors and generating facilities; to provide
safety requirements for electricity supply, electrical
wiring and products
–– Fire Services Ordinance (Cap 95)
Serves to regulate the registration of fire service
installation contractors and to provide for the control of
the sale, supply, installation, repair, maintenance and
inspection of fire service installations or equipment
–– Waterworks Ordinance (Cap 102)
The key legislation regulating waterworks in Hong Kong
–– Lifts and Escalators (Safety) Ordinance (Cap 327)
Serves to provide for the design and construction of lifts
and escalators, for the maintenance in safe working
order of lifts and escalators, and for the examination and
testing of lifts and escalators
–– Occupational Safety and Health Ordinance (Cap 509)
and subsidiary regulations
Regulates safety and health of all economic activities
including construction sites
28
–– Factories and Industrial Undertakings Ordinance
(Cap 59) and subsidiary regulations
Applies to construction sites and imposes general duties
on proprietors and employees and prescribes detailed
safety and health standards on various aspects of
hazardous work activities, plant and machinery, processes
and substances
–– Roads (Works, Use And Compensation) Ordinance
(Cap 370)
Regulates the planning, design and construction of roads,
resumption of land for construction of roads and related
compensation and claims
–– Arbitration Ordinance (Cap 609)
While this Ordinance provides for a unitary regime of
arbitration based on the United Nations Commission
on International Trade Law (UNCITRAL) Model Law on
International Commercial Arbitration, the Ordinance
allows parties to an arbitration agreement to retain
some key features of the domestic arbitration regime
under the previous legislation on arbitration by choosing
to opt in a series of provisions set out in the Ordinance
(Opt-in Provisions)
In relation to Hong Kong construction subcontracts, the
Ordinance provides that the Opt-in Provisions that are
automatically applied under the arbitration agreement
between the main contractor and the employer, shall be
deemed to apply to subcontracting parties’ arbitration
agreement provided that the subcontracting parties are
situated in Hong Kong. This is applicable to arbitration
agreements under the subcontracts between each and
every level of subcontracts
Insurance
Common types of insurance required under contract:
–– All risks insurance: damage to works and site materials
–– Professional indemnity insurance: professional negligence
where the contractor is responsible for design
–– Public liability insurance: damage, injury and death to
third parties
–– Product liability insurance: damage and injury arising
from products incorporated within the contract works
PFI/PPP
Current market position
PFI/PPP is not prevalent in Hong Kong. There were a
few very early PFI/PPP infrastructure projects under
the models of Design-Build-Finance Operate (DBFO),
Operation & Maintenance (O&M) or Build-Own-
Operate-Transfer (BOOT). Examples of such projects
in Hong Kong include the Cross Harbour Tunnel,
Western Harbour Crossing, Tate’s Cairn Tunnel, Tsing
Ma Control Area and the River Trade Terminal of
Tuen Mun.
The Asian financial crisis in 1997-98 put pressure
on government finances, particularly on its capital
expenditure budget and measures were taken to
reduce the fiscal deficit. As a result, the Hong Kong
government focused its attention on PPP schemes
again in early 2000 (as part of its Private Sector
Involvement (PSI) initiative) for the delivery of public
services and infrastructure. While most stakeholders
acknowledged the benefits of PPP and endorsed PPP in
principle, there were still very few PPP projects.
In 2004, the government was set to take bids for
an ice-skating centre project in Tseung Kwan O
and a leisure centre project in Kwun Tong to be
financed through PPP. However, these projects
were criticised as being too small for the efficient
adoption of this type of PPP scheme and were seen
as essentially land premium deals. It has been
suggested that in Hong Kong, where the significant
costs involved need to be offset against project
revenues, small projects are not suitable for PPP
and it may be better to look to other tools such as
outsourcing, service or management contracts
for private sector involvement. For PPP to become
increasingly common, it is essential that the
government is able to bring forward projects of
the right scale with the appropriate commercial
potential.
29
 Construction pipeline
Energy infrastructure
India
• 750 MW grid-connected solar PV power projects under Infrastructure is a major sector that propels overall development of
Jawaharlal Nehru National Solar Mission the Indian economy. The Secretariat for Infrastructure in the Planning
(Announced - dates pending) Commission is involved in initiating policies that would ensure time-
• Bhadravati Thermal Power Project, Maharashtra bound creation of world class infrastructure in the country. The
(Announced - dates pending) focus is on power, bridges, dams, roads and urban infrastructure
Transport infrastructure development.1
• Kochi Metro Rail Project, Kerala - Infrastructure Overview, National Portal of India
(Announced - dates pending)
• Visakhapatnam Port Trust New Facility, Andhra Pradesh
Key industry bodies
(Announced - dates pending)
• Ministry of Power
Social infrastructure
• Ministry of Road Transport and Highways
• Low Income Housing Finance Project
(Announced - dates pending) • National Highways Authority of India FICCI
• Slum Rehabilitation Project, Mumbai • Tariff Authority for Major Ports (TAMP)
(Announced - dates pending)
Market facts
• USD 403.4 billion value of Indian construction and engineering industry2
• Second largest market activity after agriculture3
• Third largest construction market by 20254
• Building and construction industry contributes to almost 15% of the
country’s gross domestic product (GDP)5
• USD 1 trillion government investment in infrastructure sectors for the
Twelfth Plan (2012-13 to 2016-17)6

1 Infrastructure overview, National Portal of India

2 Indian Construction Market - Overview, International Building & Construction Show
3 Construction Sector Overview, CONSTRUTECH India 2013
4 India: world’s third largest construction market by 2025, India Brand Equity Foundation, July 2013
5 Indian Construction Market - Overview, International Building & Construction Show
6 The road ahead - Highways PPP in India, PricewaterhouseCoopers India, 2012

30 31
 Construction
Contractual issues
–– Delays in awarding contract
–– Issues in contract negotiations
–– Contractual safeguards for unforeseeable circumstances
–– Need for drafting of contractual terms in comprehensive
manner detailing obligations of parties, asset sharing,
liability and mode of sharing revenue/profits
Legislation
–– Electricity Act, 2003
Consolidates the laws relating to generation,
transmission, distribution,trading and use of electricity
and generally for taking measures conducive to
development of electricity industry
–– National Highways Authority of India Act, 1956
Provides for the declaration of certain highways as
national highways and for the regulation and governance
of matters related therewith
–– Indian Ports Act, 1908
Central legislation for the regulation of ports and
port-charges across the country
–– Major Ports Trusts Act, 1963
Provision for the constitution of port authorities
for certain major ports in India and to vest the
administration, control and management of such ports in
such authorities and for matters connected therewith
Insurance
–– All risks insurance: damage to works and site materials
–– Professional indemnity insurance: professional negligence
where the contractor is responsible for design
–– Public liability insurance: damage, injury and death to
third parties
–– Advance loss of profit insurance
32
PFI/PPP
Contractual issues
–– Lack of flexibility in contract renegotiation for long-term
projects to accommodate changes in circumstances
–– Lack of consensus between public and private parties
regarding terms of agreement
–– Need for drafting of contractual terms in comprehensive
manner detailing obligations of parties, asset sharing,
liability and mode of sharing revenue/profits
Legislation
–– Draft National Public-Private Partnership Policy, 2013
(Pending)
Establishes the broad principles for pursuing a project on
a PPP basis and to provide a framework for identifying,
structuring, awarding and managing PPP projects
–– Draft PPP Rules, 2012 (Pending)
Defines the norms and procedures for procuring,
regulating and structuring PPP projects and decision
making
–– Public Procurement Bill, 2012 (Pending)
Regulates public procurement with the objectives of
ensuring transparency, accountability and probity in
the procurement process
Insurance
–– All risks insurance: damage to works and site materials
–– Professional indemnity insurance: professional negligence
where the contractor is responsible for design
–– Public liability insurance: damage, injury and death to
third parties
–– Advance loss of profit insurance
33
 Construction pipeline
Energy infrastructure
• Upper Cisokan Hydropower Plant, West Java
(2012 - completion date pending)
• Central Java IPP coal-fired plant
(2013 - completion date pending)
• Sarulla Geothernal Power Project, North Sumatra
(2013-2017)
• Karama Hydro Power Plant, West Sulawesi
(Announced - dates pending)
Transport infrastructure
• Trans-Java Toll Road Mega Project
(2008-2014)
• Jakarta Monorail
(2013-2016)
• MRT Jakarta
(phase 1: 2013-2017; phase 2: dates pending)
• Trans-Sumatra Highway Mega Project
(2013 - completion date pending)
• Soekarno Hatta Airport rail link, Jakarta
(2014-2018)
• Central Kalimantan Coal Railway Project
(2014-2018)
• Bandung Monorail
(2014-2025)
• MRT Surabaya
(2014 - completion date pending)
• Jakarta-Bandung highspeed railway
(Announced - dates pending)
Social infrastructure
• Mimika Sports Complex, Timika
(2013 - completion date pending)
• Central Aceh Regional Hospital, Nanggroe Aceh
Darussalam
(2015 - completion date pending)
34
Indonesia
“In May 2011, the Indonesian government launched a 15-year economic
development master plan, MP3EI, on the establishment of six economic
corridors in Indonesia. The successful implementation of MP3EI will
transform Indonesia into one of the 10 major economies in the world by 2025.
Implementation requires the participation of all stakeholders and will focus
on tangible and measurable priorities. The MP3EI will be implemented in three
phases: 2011-2015; 2016-2020; and 2021-2025.
Infrastructure is expected to play a pivotal role in the development of the
six economic corridors. The traditional approach of funding infrastructure
from the state budget is not sustainable because of limited public finances. The
alternative is Private Provision of Infrastructure (PPI). Hence, the reliance on
PPI underpins the MP3EI. A significant number of infrastructure projects in
the MP3EI are expected to be financed through an appropriate Public-Private
Partnership (PPP) scheme.”1
- Armida S. Alisjahbana, State Minister of National Development Planning
Key industry bodies
• Bappenas (National Development Planning Agency)
• PT Sarana Multi Infrastruktur (SMI)
• Indonesia Infrastructure Fund
• Indonesia Infrastructure Guarantee Fund
• BKPM (Investment Coordinating Board)
• Badan Pengatur Jalan Tol (BPJT)
• Badan Pendukung Pengembangan Sistem Penyediaan Air Minum
(BPP SPAM)
Market facts
• Sixteenth largest economy in the world and the largest in Southeast Asia
• IDR 228.3 trillion of construction in Q2 of 20132
• 10.25% growth in gross domestic product (GDP) in Q2 of 2013 for
construction2
• In April 2013, IMF projected Indonesia’s economic growth rates in the
6% range for the 2013-2017 period (ranging from 6.3% - 6.8%)
• IDR 132.2 trillion cumulative investment realisation from foreign direct
investment (FDI) in first semester of 2013 - an increase of 30.2% compared
to the same period in 20123
1 PPP Infrastructure Projects Plan in Indonesia, Ministry of National Development Planning 2012
2 Economic Growth of Indonesia Quarter II-2013, Badan Pusat Statistik Republik Indonesia
3 Domestic and Foreign Direct Investment Realization, The Investment Coordinating Board of Republic of Indonesia
(BKPM), July 2013
35
 Construction
Contractual issues
Common forms of contract procurement include:
–– Traditional (most common form)
–– Design and build
–– Management contracting
–– No particular standard form of contract used for private
projects. However, projects that involve international
parties or require loans from international banks often
use FIDIC contracts
–– Indonesian construction regulations specify that
construction contracts must:
–– Contain certain documents prescribed under the
Indonesian construction regulations
–– Contain a provision on intellectual property rights
–– Use Indonesian law as the governing law
–– Be made in Indonesian language. Bilingual construction
contracts in English and Indonesian may be made if
there is any foreign party involved (in which the legally
binding language must be stated)
–– Liquidated damages clauses are often included in
construction contracts for contractor delays. Generally,
the parties will be free to determine the amount of
liquidated damages as long as the amount does not violate
the principles of justice stipulated under the Indonesian
Civil Code
Key legislation
–– Law No. 25 of 2007 on Investment and Presidential
Regulation No. 36 of 2010
Specifies rules on foreign investment in Indonesia,
including restrictions on the type and amount of foreign
investment that may be made in Indonesia
–– Law No. 18 of 1999 on Construction Services
Specifies requirements in relation to construction
services, construction services providers’ appointments,
licensing requirements and construction contracts
–– Government Regulation No. 28 of 2000 as lastly
amended by Government Regulation No. 4 of 2010 on
Business and Role of Society of Construction Services
Specifies the type, registration and licensing of
construction services business as well as an overview of
the role of society of construction services in the form of
(i) forum or (ii) association
36
–– Government Regulation No. 29 of 2000 as amended by
Government Regulation No. 59 of 2010 on Construction
Services Implementation
Provides further requirements on, amongst others, the
appointment of construction services providers, the
content of construction contracts and the implementation
of construction services
–– Government Regulation No. 30 of 2000 on the
Implementation of Construction Services Supervision
Specifies the roles of the central and regional government
in supervising construction services activities
–– Law No. 28 of 2002 on Buildings and Government
Regulation No. 36 of 2005 on Implementing Regulation
of Law No. 28 of 2002 on Buildings
Specifies building requirements, rules on construction,
use and conservation of buildings and rights and
obligations of building owners and building users
–– Regulation of Jakarta Special Capital City Region No. 7
of 2010 on Buildings
Specifies requirements for construction of buildings
within the Jakarta area
Insurance
–– Common types of insurance include:
–– Contractor’s All Risk (CAR) or Erection All Risk (EAR)
–– Professional indemnity insurance (for design and
professional advisory elements)
–– Public liability insurance
Other considerations
–– The ‘Negative Investment List’ under Presidential
Regulation No. 36 of 2010, identifies what percentage
of projects in different sectors may be owned by foreign
investors. Construction services can only be carried out
by foreign entities if the value of the project exceeds
approx USD 10 million, and the maximum foreign
equity investment for such services is capped at 67%.
For technical consultants such as engineers, the
maximum foreign equity stake is 55%
–– Contractors and consultants in construction
arrangements must be appointed by owners through
public or limited tender in accordance with Indonesian
construction regulations. Direct appointment is only
allowed in certain limited circumstances such as (i)
urgent construction projects for public health and
safety, (ii) complex construction works that can only be
performed by certain construction services providers or
holders of certain licenses, (iii) confidential construction
projects related to the security of the state, (iv) small
scale construction projects, (v) advanced construction
works that are inseparable from the previous works and
(vi) construction works that can only be performed by
copyright or license holders
PFI/PPP
Contractual issues –– Law No.2 of 2012 on Land Procurement for
–– Indonesia has a long history of PPP in infrastructure Development in the Public Interest and Presidential
development. In the 1990’s, the government promoted Regulation No. 7/2012
The 2012 Land Acquisition Laws allow the national
independent power producers (IPP) and operational
cooperation (KSO) programs for telecommunication government, provincial governments and state owned
sector expansion. A few toll roads were also developed enterprises (SOEs) to become the owners of the land
on a PPP basis. However, these were negotiated deals through a ‘fast track’ consultative process, aimed at
accelerating the land acquisition process
typically awarded in the absence of competition. These
early projects were met with only limited success, in some –– Presidential Regulation No. 78 of 2010 (“PR 78/2010”)
cases, resulting in disputes and contract renegotiation and the Minister of Finance Regulation No. 260/2010
–– The current Indonesian PPP regulations were introduced Specifies the legal framework for infrastructure
in 2005 and provide for private sector investment in guarantees which may be provided by the Indonesia
various infrastructure sectors such as airports, ports, Infrastructure Guarantee Fund (IIGF) on PPP projects
roads and bridges, water and irrigation system, waste
management, technology and communication, electricity –– Minister of Finance Regulation No. 223 of 2012
and oil and gas. The PPP regulations contemplate Specifies requirements for Viability Gap Funding (VGF)
government concession grants to private companies that in Indonesia
will undertake infrastructure projects under cooperation –– Government Regulation No. 61 of 2009 on Ports
agreements or certain licenses Specifies requirements in relation to the construction,
–– Projects eligible for a PPP concession grant must first be development, management and operation of ports
evaluated on the basis of a pre-feasibility study, a defined
Insurance
cooperation scheme, a financing plan and a process plan/
–– Indonesian PPP regulations are silent on insurance
timeline
requirements for PPP projects. In practice, the types of
–– Public tendering of PPP projects is mandatory. Award insurance used in PPP projects are similar to those under
of infrastructure projects by the government based on other types of construction projects in Indonesia
direct appointment is no longer permitted. Indonesian
Other considerations
PPP regulations, as well as many sector-specific laws
–– Every year, the Indonesian government issues a PPP book
and implementing regulations, stipulate the processes
and factors that must be applied or considered in listing prospective PPP projects in various preparation
public tendering stages planned by relevant government contracting
agencies. Under the Indonesian 2013 PPP Book, 14 projects
–– Projects are usually initiated by the public sector (solicited
are under the category of ‘prospective projects’ and 13
projects), although the private sector may also initiate
projects are under the category of ‘potential projects’
projects (unsolicited projects) and receive some benefits
for doing so
Key legislation
–– Presidential Regulation No. 67/2005 on Public Private
Partnership in Providing Infrastructure (PR 67/2005)
Main regulation governing PPPs. Has been amended by
Presidential Regulation No. 13 of 2010 and by Presidential
Regulation No.56 of 2011 (PR 67/2005 as Amended).
Further administrative details of the scheme are set
out in Bappenas Regulation No. 3 of 2012 (Bappenas
Regulation)
The PPP regulations provide for the selection of projects,
details of the tendering process, matters to be agreed
between the private entity and the government
contracting agency, as well as the government support.
Under the PPP regulations, PPP projects are referred to
as ‘cooperation projects’ and a PPP either takes the
form of a ‘cooperation agreement’ or a license being
entered into between the private entity and the relevant
government entity
37
 Construction pipeline
Energy infrastructure
Kingdom of Saudi Arabia
• Power Plant 12 (PP12), Riyadh The Kingdom of Saudi Arabia is the largest economy in the Arabian
(2013-2015) Gulf and features the largest construction market. Between 2010-
• Integrated Gasification Combined Cycle Power Plant 2014, USD 384 billion is expected to be spent by the government on
(IGCC), Jazan public infrastructure projects. This is supplemented by a growing
(2014 - completion due 2016) private sector market, focusing particularly on real estate, hospitality,
• Rabigh IPP, Mecca education and healthcare projects. Investment has accelerated in
(Phase 2 construction commenced 2014 - 2016)
recent years and is projected to continue to increase for the medium
Transport infrastructure term beyond 2014. This has caused a major influx of international
• Jeddah Airport construction contractors and consultants to enter the Saudi market in
(2010-2015) recent years.
• Saudi Landbridge Project
(2014-2016) Key industry bodies
• Riyadh Metro Project • The Saudi Council of Engineers (SCE)
(2013-2018)
• The Saudi Arabia General Investment Authority (SAGIA)
Social infrastructure
• The Ministry of Commerce and Industry (MOCI)
• King Abdullah Medical City, Makkah
(2014-2015) • The Ministry of Municipal and Rural Affairs (MOMRA)
• Ministry of Housing - 500,000 Homes Program • The Saudi Arabia Standards Organisation (SASO)
(2013 - phase 1 completion due 2016)
• Kingdom City, Jeddah
Market facts
(2013-2019) • Saudi construction market accounts for 40% of the GCC market1
• USD 90 billion worth of construction projects expected to be awarded
in 20141
• USD 17.8 billion investment set aside by government for transport and
infrastructure projects - 2.5% more than 2013 budget2
• Education and healthcare are key priorities, taking up to 38% of government
spend in 20142
• USD 35.7 billion investment planned for power and water projects in 20143
• Volume of Saudi Arabia’s construction and contractor market expected to
hit USD 300 billion by 20154

1 KSA to award SR337.5bn construction deals in 2014, Arab News, November 2013
2 Saudi government to increase budget spend, Arabian industry.com, January 2014
3 Saudi to spend $35.7bn on power and water in 2014, Construction Week Online, December 2013
4 Volume of KSA construction market to hit $300bn by 2015, Big Project Middle East, January 2014

38 39
 Construction
Contractual issues
–– Common procurement models include:
–– Traditional (construct only)
–– Design and build
–– Engineering, procurement and construction (EPC)
–– Common standard forms include:
–– Public Works Contract (Government)
–– FIDIC (Red, Yellow, Silver & White Books)
–– Saudi Aramco EPC
–– Saudi Arabia is an Islamic State governed by Shari’ah law
–– Contracts on Saudi projects usually subject to Saudi
law (certainly for government contracts), however, we
sometimes see other jurisdictions referred to in contracts
for Saudi projects (e.g. England & Wales, Switzerland)
–– No broad-based Civil Code (unlike other GCC States).
Commercial contracts interpreted pursuant to religious
law principles. Freedom of contract recognised unless
offends Shari’ah concepts (such as interest)
–– Pay when paid clauses common and generally enforceable
–– Liquidated damages/penalties clauses common but
enforcement open to challenge under Shari’ah
–– Liabilities hard to limit or exclude if inconsistent
with what Shari’ah would otherwise award; however,
consequential loss claims are generally not enforceable
under Shari’ah anyway
–– Available dispute forums include local courts, local
arbitration and international arbitration. Care needs to be
taken in which to choose, based on type and scale of likely
disputes and enforcement issues
40
PFI/PPP
Legislation Contractual issues
–– Anti-Fronting Law –– PPPs in Saudi Arabia are rare. As such, there is no PPP
Makes it illegal for foreigners to trade in Saudi Arabia law in Saudi Arabia or any standard set of agreements
without a licence –– Projects in the oil & gas and power & water sectors
–– Foreign Investment Law sometimes have a project finance / BOT element,
Foreign companies are permitted to trade in Saudi Arabia however, there is not yet an established track record in
provided that they have obtained a licence from the Saudi other sectors
Arabia General Investment Authority (SAGIA) –– Projects in the pipeline that may involve PPP include:
–– Professional Companies Law –– Affordable housing
Regulates foreign professions trading in Saudi Arabia –– Healthcare
(such as engineers and designers) –– Transport infrastructure
–– Government Tenders & Procurement Law Legislation
Regulations for direct procurement by government, which –– Government Tenders and Procurement Law
remains the dominant driver of the construction industry This regulation remains an obstacle to PPP as government
–– Arbitration Law departments must seek special permission to depart from
Regulation based on UNCITRAL Model Law by which traditional procurement models
local arbitration is supported as an alternative to local
court proceedings
–– Labour Law
Contains strict requirements for the sponsorship and
employment of expatriate labour
Insurance
–– Traditional insurance is contrary to Shari’ah and is
not permitted
–– Foreign insurers are not permitted to offer direct
insurance cover without a specific exemption
–– Despite this, most forms of cover commonly used by
the construction industry are available for Saudi
construction projects
–– Decennial liability provision only applies to
government projects
41
 Construction pipeline
Energy infrastructure
Libya is committed to renewable energy and plans
include the construction of:
• A 650 MW solar power station to the south of Obari
• A thermal heating plant with annual production
capacity of 40,000 units
• Various wind farm projects throughout the country
including in Dernah, Al Maqrun, Emslatah, Tarhunah,
Asaba, Gallo, Almassara, Alkofra, Tazarbo, Aljufra,
Ghatt, Ashwairef, and Sebha
Transport infrastructure
• Road and bridge building will be a priority including
2,000 km of road improvements
• Authorities are planning to build new terminals
in the airports of Benghazi and Misrata for over
USD 47 million
• Potential resumption of the USD 4.5 billion project to
link Benghazi and Sirte with a 554 km railway
• Other proposed developments, including the creation
of a railway system and metro that connects to the
existing international airport indicates that other parts
of the wider rail network project may also be resumed or
commenced
Social infrastructure
• Re-launch of the stalled Benghazi new town project -
the regions’ largest home-building programme worth
approximately USD 100 billion over the next decade4
• 70,000 housing units a year are needed to keep pace
with the growing population
• Dramatic growth in hotel construction is forecast as part
of a USD 7 billion tourist development plan
42
Libya
Libya’s stated goal to become the business gateway to Africa will require
long-term global co-operation with the international community.
Since the revolution in 2011, the construction market has been on
hold. Whilst there is a lot of activity at the SME level by local house
builders and business fit-out companies, the major public procurement
programme that many expected would take place, has not yet
materialised. Three main reasons for this include:
––Current security situation: the fact that the Libyan police force and
security services have not yet got the country fully under control has
meant that many major international companies still feel that it is too
early to come to Libya
–– Legacy construction contracts: it is estimated that there are
approximately 10,000 stalled major contracts in Libya. These contracts
were let prior to the revolution and are either in a force majeure type
situation, or are under investigation by the State to make sure that they
are legitimate and fairly priced contracts. Until these contracts restart
and contractors are paid for the work that they have done to date, most
of the affected companies are reluctant to come back to Libya and
resume their activities
–– Lack of authority to proceed: many Ministries still do not feel properly
empowered to start letting contracts because of the lack of a clear high
level policy setting out the government’s priorities. Additionally, many
senior officials are reluctant to award any type of contract because there
is currently a prevailing atmosphere of suspicion by the general public,
which means that it is safer for Ministers to do nothing than risk letting
contracts and then being accused of corruption or incompetence
Key industry bodies
• General Union of Professional Engineers
• Libyan Industry Trade Union
• Libyan Businessmen’s Association
• Libyan Business Council
Market facts
• Ambitious plans for economic development backed by long-term budgets
totaling USD 500 billion over the next 25 years1
• USD 100 billion government investment planned for infrastructure between
2010-2014 under the National Development Plan2
• Approximately USD 55.3 billion allocated under the National Development
Plan in 2013, representing 60% of the total annual budget2
• One of the most hydrocarbon-dependent economies in the world generally
accounting for over 70% of gross domestic product (GDP) in 20123
1 Oil & Gas Libya 2014
2 Why Libya, Build Expo Libya, September 2013
3 Libya Snapshot Q2, KPMG Africa Limited, 2012
4 Libya’s $100 bn Housing Opportunity, Architects Journal, June 2013
43
 Construction
Contractual issues
–– Contracting with the public sector is regulated by the
Administrative Contracts Regulation No. 563 of 2007
(the Regulation)
–– Under this regulation, there are generally four standard
forms of contract used by the government, all of which
are in Arabic
–– There are fairly onerous provisions relating to the
payment and taxation arrangements and it is also a
requirement that all onshore contracts executed in Libya
will be subject to stamp tax, payable at a rate between
0.5%-1% on the total corporate income of a company
–– The Regulation also contains special rules for state
contracts. These provisions are mandatory, including
the choice of Libyan law to govern the contract and the
requirement to include a Libyan law dispute resolution
clause. The only governmental instrumentalities that
have freedom to agree a foreign governing law are
currently:
–– The Libyan Investment Authority
–– The Great Man-made River Authority
–– The Libyan National Oil Company
–– Other governmental instrumentalities can apply to the
Prime Minister’s office for a special exemption in relation
to certain projects, but will need to show why such an
exemption is beneficial for the project and Libya as a
whole with regard to prevailing public policy
–– Arbitration clauses in public sector contracts are rare but
can be used, provided that there is a special governmental
exemption for a particular contract or project
The Chairman of a Libyan joint stock company and
the CEO of a limited joint venture company must be
Libyan nationals
For construction and contracting, the following
requirements apply:
–– Up to a share capital of LD 30 million - only Libyan
companies may participate
–– A share capital of between LD 30 million-LD 50 million -
joint companies may participate
–– A share capital of above LD 50 million - 100% foreign
owned branches may participate
–– Law No. 23 for 2010 regarding Commercial Activities
Stipulates the terms under which business is done
generally in Libya. All local and foreign businesses
are subject to this law. Article 375 states that the
Ministry of Economy has authority to set the maximum
percentage shareholdings of foreign investors. Prior to
the introduction of Decree No. 207 of 2012, the default
position was that foreign investors could take up to a 65%
shareholding interest in a Libyan company
–– Libyan Civil Code of 1953
Under the Civil Code, there is mandatory decennial
liability for both the architect/design consultant and the
contractor for ‘fixed installations’. A Libyan court will
apply local law in relation to decennial liability resulting
from projects in Libya, even if a foreign law has been
determined as the proper law of the contract in a contract
between two private sector entities. In general, it is
permissible to cap or exclude certain types of damages,
with the exception of gross negligence and fraud
PFI/PPP
Other considerations To date, we are not aware of any projects having been
The state of the construction market is a source of great let on a PPP/PFI basis. There was talk of this before the
frustration for many, who were hoping that a large public revolution and the initiative is now gathering considerable
procurement programme would help kick start the Libyan momentum.
economy and develop the private sector, thereby creating A new PPP Law has now been drafted and is being
jobs and other opportunities for young Libyans who considered at senior government levels. There appears to
currently have limited employment and other prospects. be considerable support for this initiative as it is seen as
Despite the negative short term outlook, the longer term a potential mechanism to invigorate the private sector,
outlook is compelling; it is conservatively estimated that utilize the high levels of liquidity in local banks, bring in
the Libyan rebuild costs will be something like LD 400 foreign expertise and reduce corruption. There is still a
billion, and this is just to restore Libya to the position it long way to go before we can expect to see the first PPPs
was in prior to the revolution. On top of that, there will coming to market, but we believe that this will happen
be a whole host of new construction opportunities as in the medium to long term. Our expectation is that the
Libya tries to catch up on lost time, building new schools, power sector and the housing sectors are the most likely
hospitals, roads, power stations, desalination plants, ports, first movers down this path.
airports and railways. It is certainly a market that holds
enormous promise, and simply because the spotlight has
switched away from Libya in the international media, it
does not mean that the opportunities and prospects are
in any way diminished. The backlog of projects that never
materialised under the old regime and the fact that the
existing infrastructure has not been upgraded for decades,
means that the need is now urgent and this remains
a priority for Libya. Almost all government Ministers,
including the Prime Minister are ‘on record’ as saying that
they need to start the cranes moving in Libya, but as at the
date of this publication, there is not much evidence that
this is happening.

Legislation
–– Decree No. 563 for 2007 regarding the Regulation and
Issuing of Administrative Contracts
Applies to all contracts with Libyan government entities
or relating to development projects which are funded by
the public budget
–– Decree No. 207 for 2012 regarding Foreign Participation
in Companies, Branches and Representative Offices in
Libya
In non-restricted categories of business, foreign investors
are only entitled to take minority shareholdings,
with at least 51% of the shares required to be owned by
Libyan nationals
Foreign shareholdings may be increased to 60%, only
with the approval of the Minister of Economy if special
or technical considerations apply
The restricted categories reserved for wholly owned
Libyan enterprises from Decree 103 now also includes
retail and various types of service companies and
consultancies
Insurance
–– Common types of insurance include:
–– Contractors All Risks/Erectors All Risks – insurance for
works and equipment
–– Third Party Liabilities/Public Liability-personal injury
and property damage
–– Workers’ compensation
–– Professional indemnity insurance: professional
negligence where the contractor is responsible for
the design. Full cover for decennial liability under the
Libyan Civil Code is not normally available unless a
specially designed product is requested, in which
case it will almost always be the case that such
products are un-commercial because of extremely
high policy prices

44 45
 Construction pipeline
Energy & power
• Tavan Tolgoi Power Plant, Umnugobi province
(2010-2015)
• Sainshand Industrial Complex (including six processing
and manufacturing plants), Dornogovi province
(2010-2016)
Transport infrastructure
• New Ulaanbaatar International Airport, Khushigt Valley
(Ongoing - completion due 2016)
• Ulaanbaatar Metro Project, Ulaanbaatar
(Announced - completion due 2020)
• Sustainable Urban Transport Program - including the
development of a bus rapid transit system (BRT), three
additional bus depots and the upgrade of 11.1 km of
trolleybus infrastructure
(Announced - final phase completion due 2020)
• ‘New Up Building’ programme - 5,572 km of roads and
900 km of highway connecting Ulaanbaatar with
aimags (provinces) to be restored under USD 3.75 billion
program
(Ongoing - completion due 2030)
• ‘Northern Corridor’ development - in December 2013,
Mongolia, Russia and China signed a statement agreeing
to accelerate the development of a Trans-Mongolian
Railway. Under the trilateral statement, the sides will
formulate a master plan for the development of the
railway by the first quarter of 2014
Social infrastructure
• 96 Soum Center Project - hospitals, schools,
kindergartens, vocational training and business
centers will be built to service local areas alongside
new housing supply
(Ongoing - completion due 2016)
• 100,000 Housing Project - construction of 100,000 units
of affordable family housing across the country, the
majority of which being built in Ulaanbaatar
(Ongoing - completion due 2016)
46
Mongolia
At its peak, the Mongolian empire stretched from the Danube to South
East Asia. Today, Mongolia covers over 600,000 square miles (an area
over six times as great as that of the UK) but with a population of less
than three million people, it is the most sparsely populated country in
the world. Economic activity in Mongolia has traditionally been based
on herding and agriculture, but extensive mineral deposits of copper,
coal, molybdenum, tin, tungsten and gold have emerged as a driver
of industrial production and led, in recent years, to double-digit gross
domestic product (GDP) growth. The challenges facing the country are
various and include its harsh climate, the challenge of getting its natural
resources to market efficiently and its relations with international
investors. Some of these it can do little about but nevertheless, some
commentators believe that Mongolia could, on a per capita basis, become
the wealthiest country in the world.
The government’s budget for 2014 has reaffirmed investment in the
economy. Debt levels will be higher in the short term (to be financed by
issuing bonds) but the expectation is that earnings will improve in the
medium to longer term.
Key industry bodies
• Ministry of Construction and Urban Development
• Ministry of Road and Transportation
• Ministry of Mining
• Mineral Resource Authority
• Petroleum Authority
• Mongolian National Chamber of Commerce
Market facts
• Government pipeline of GBP 32.4 billion to be invested in infrastructure,
construction, mining and energy by 20152
• 2014 draft budget outlines MNT 158 billion of investment in energy,
MNT 109.9 billion in health, MNT 99.5 billion in transportation and
MNT 85.1 billion in culture, sports and tourism sectors. Mining sector to
receive smallest investment of MNT 4.01 billion3
• 16.8% real GDP growth in 20134
• In 2012, Mongolian Government issued USD 1.5 billion ‘Chinggis Bond’
named after Mongolian legend, Chinggis Khan
• JPY 30 billion (USD 290 million) ‘Samurai Bond’ issued on the Japanese
Capital Market in 2013
1 The look of 2014 budget investment, UB Post, October 2013
2 The Report Mongolia 2013, Oxford Business Group
3 The look of 2014 budget investment, UB Post, October 2013
4 The Report Mongolia 2013, Oxford Business Group
47
 Construction
Contractual issues
–– Market has developed significantly in recent years
–– Difficult to draw firm conclusions but likely that standard
forms will be commonly used
–– The civil code of Mongolia recognises the freedom
to contract, stipulating that parties to a contract are
entitled, within the applicable legal framework, to
conclude contracts freely and to define the contents of
their contracts5
–– Mongolian law is based on an overarching principle
(reminiscent of the English legal constitutional concept),
that everything that is not prohibited is allowed5
–– Contracting with the public sector is regulated under the
Procurement Law
–– ‘Oyu Tolgoi’ Project’s Investment Agreement was signed in
2009 between the Mongolian Government, Ivanhoe Mines
Ltd (Turquoise Hill) and Rio Tinto Ltd. The Investment
Agreement is the first for the Government of Mongolia
and the largest in the country
Legislation
–– Some key legislation is already in place but other
legislation is being developed
–– Civil Code of Mongolia enacted in January 2002,
as amended
–– The Law on Status of Legal Professionals enacted
early in 2013
–– Mongolian New Securities Market Law enacted in 2013,
as well as Mongolian Law on Investment and Investment
Funding Law
–– The new Investment Law provides legal guarantees to
protect investment in Mongolia and sets out tax and non-
tax incentives in order to promote investment in Mongolia
–– Non discriminative Investment law seeks to ensure no
discrimination between foreign investment and local
investment
–– The Mongolian President initiated the amended
Minerals Law in early 2013 but it is undergoing discussion
in Parliament
Current market position
Insurance The Ministry of Economy is in cooperation with the
–– Mongolian insurance market in its early stages Asian Development Bank to implement PPP principles
–– Ongoing reform may build local underwriting capacity in a friendly environment. Accordingly, ‘Guidelines
and develop non-bank institutional investors for PPP’ were recently produced and introduced in
–– Total premiums in the first half of 2012 were only
February 2014.
GBP 45 million6 Some projects have been implemeted and others
are in negotiation - one significant PPP project in
Other considerations development is the Ulaanbaatar Metro.
–– Majority of construction growth has been driven by
the mining sector and its effect is filtering through
the economy
–– Over last two decades, construction has moved from
state-owned and controlled toward one driven by
private sector
–– Climatic conditions, a lack of a skilled workforce and
logistical issues have acted as a brake on progress
PFI/PPP
Key legislation
–– Main legislative PPP framework includes: Concession Law,
Constitution of Mongolia, Civil Code, Law on Government,
Law on State and Local Property7
–– Main PPP policy framework is the State Policy on PPP
as adopted by the Parliament Resolution No.64, dated
15 October 2009. It expresses strong will of the State to
promote the private sector and to reduce the burden of
the government to develop infrastructure and social
services with limited funding and human resources

5 The Report Mongolia 2013, Oxford Business Group

6 Mongolian Insurers’ Association
7 Assessment of the Quality of the PPP Legislation and of the Effectiveness of
its Implementation 2011, European Bank for Reconstruction and Development
(EBRD)

48 49
 Construction pipeline
Energy infrastructure
• Privatisation of 10 Independent Power Plants
(Ongoing - completion date pending)
• Unbundling and privatisation of the state-run Power
Holding Company of Nigeria - this brought about the
privatisation of five electricity generating companies and
10 electricity distribution companies
Transport infrastructure
• Reconstruction and upgrade of the airport terminals in
Lagos, Abuja, Enugu, Port Harcourt and Kano
(Announced - completion date pending)
• Construction of a modern state of the art international
airport in Lekki, Lagos State
(Announced - completion date pending)
• Construction of Lekki Deep Sea Port, Ibeju-Lekki,
Lagos State
(Announced - completion due 2016)
• Brass LNG (Gas Port) and Koko Port (Gas Revolution)
are greenfield projects currently being considered for
privatisation by the Nigerian authorities
• Snake Island Service Port, Akwa Ibom Deep Sea Port,
Olukola Deep Sea Port and Badagry Deep Sea Port are all
greenfield port projects under consideration by the FGN
• The Blue Line (Okokomaiko -Marina) Rail Project is phase
one of seven rail projects planned for Lagos State
(Ongoing - completion date pending)
Social infrastructure
• National Centre for Women Development, Abuja
(Ongoing - completion date pending)
50
Nigeria
With the advent of democracy in 1999, the Federal Government of Nigeria
(FGN) came up with an aggressive and ambitious economic blueprint tagged
“Vision 20:20”.
The vision is principally aimed at making the Nigerian economy one of the top
20 by the year 2020. Hence, the key goals to achieve to ensure the success of this
vision are outlined as follows: i) GDP of not less than USD 900 billion; ii) GDP
per capita of not less than USD 4000; iii) power generation of 40,000 MW; iv)
attracting not less than USD 130 billion private capital over the next 10 years;
v) guaranteeing productivity by strengthening linkages between key sectors of
the economy; and, vi) fostering sustainable social and economic development by
ensuring national security and enhancing infrastructure.
Unsurprisingly, adequate infrastructure was rated as the indicative parameter
for vision 20:20. In this regard, Nigeria needs a total investment of USD 212
billion in infrastructure – an amount clearly beyond the FGN’s capacity. The
FGN has therefore started a campaign to raise these much needed funds through
several initiatives, including PPP and privatisation amongst others. The targeted
sources of finance are as follows: private sector 41%; federal government 31%;
states and LGAs 28%1
- Infrastructure Concession Regulatory Commission, 2012
Key industry bodies
• Council for the Regulation of Engineering in Nigeria (COREN)
• National Association of Technological Engineering (NATE)
• Nigerian Society of Engineers (NSE)
• Nigerian Institution of Civil Engineers (NICE – a division of NSE)
• Nigerian Society of Engineering Technicians (NISET)
• Surveyors Council of Nigeria (SURCON)
Market facts
• Nigerian economy experienced an average growth of 7.4% in the last decade2
• Annual infrastructure investment of USD 10 billion needed over the next
decade in order to reduce infrastructure deficit
• Approximately 7% of gross domestic product (GDP) spent on infrastructure
• Over USD 13 billion spent annually on fuel to power generators3
• Business Monitor revised upwards the growth forecast in the Nigerian
Construction sector to about 9.5% in 20134
1 Vision Led Concessions for Transportation Infrastructure Provision in Nigeria -The PPP Imperative, Infrastructure
Concession Regulatory Commission, 2012
2 Nigeria, African Economic Outlook, 2012
3 Making PPP for Infrastructure Development Happen: The Nigerian Experience, ICRC, 2012
4 Nigerian Construction Industry Forecast, Business Monitor, September 2013
51
 Construction
Contractual issues
–– Common forms of contract procurement include:
–– Traditional
–– Design, bid and build, design and build or design,
build, operate and transfer
–– Turnkey engineering/Construction contracts
–– Construction management
–– Standard form contracts are commonly used with
extensive amendments to reflect risks and peculiarities
of projects
–– Contractual approach can be adopted to mitigate or
allocate virtually all risks save for instances where
local legislation or mandatory laws apply
Legislation
–– Nigerian Urban and Regional Planning Act Cap
N138 LFN 2004
Principal legislation governing building and
construction. However, the validity of this Act and its
applicability to the entirety of Nigeria is in doubt. In
20035 as the Supreme Court of Nigeria questioned the
powers of the National Assembly to legislate on urban
and regional matters for the entirety of Nigeria
–– Physical Planning Urban Development and Building
Control Law, 2010 (the “Lagos Building Law”)
–– The Land Use Act (“LUA”) Cap L5 Laws of the Federation
of Nigeria 2004
Principal legislation which regulates the administration
of land in Nigeria
–– There are other sector specific relevant legislations
including: Nigerian Communications Commission Act
2003, Nigerian Ports Authority Act N126 L.F.N. 2004,
Environmental Impact Assessment Act, CAP E12,
L.F.N. 2004, National Environmental Standards and
Regulations Enforcement Agency (Establishment) Act
No.25 of 2007 (NESREA Act) amongst others
5 Attorney General of Lagos State v. Attorney General of the Federation
& 35 others (2003), 12 NWLR 1
52
Insurance
Compulsory Insurance Products
–– Builders liability insurance – under the Insurance Act
2003/under the Lagos State Building Control Law 2010
–– Employers liability – (Group Life) – under the Pension
Reform Act 2004
Common insurance products
–– Construction All Risks
–– Fire/Special Perils insurance
–– Theft insurance
–– Professional liability and Product liability insurance
–– Goods-In-Transit insurance
Other considerations
–– Fiscal incentives include:
–– Up to five years Income Tax Holiday under the Pioneer
Status for qualified activities
–– Infrastructure tax incentive – 20% of cost is tax
deductible
–– Free market – easy entry and exit procedures
–– The Foreign Exchange (Monitoring & Miscellaneous
Provisions) Act 17 of 1995 allows for free repatriation of
profits and dividends net of taxes through any authorised
dealer in freely convertible currency
–– The Nigerian Investment Promotion Commission Act
16 of 1995 also provides for investment guarantees for
foreign businesses/investors that ‘no enterprise shall be
nationalised or expropriated by any government of the
federation’
PFI/PPP
Contractual issues
–– In order to bridge Nigeria’s infrastructure gap, there is a
compelling need to attract foreign investment through
PPP to finance projects. Recently, the following contractual
models had been used:
–– Concessions
–– Lease
–– Service Contracts
–– Management Contracts
–– BOT (and other variations e.g. BOOT, BTO, DBOT,
DFBOT, etc)
–– EPC Contract remains the typical construction contract
for most of the big projects
–– Design and Build is also becoming increasingly popular
for sub-contracting either between the EPC Contractor
and the sub-contractor or the Project Company and a sub-
contractor
–– No strict legislation regime for site/construction risks,
hence, parties tend to negotiate these risks freely
–– There is a strong drive by the Nigerian PPP regulatory
agencies for disclosure of PPP contracts to enhance
transparency and public awareness
Legislation
–– Infrastructure Concession Regulatory Commission
Act 2005
Enacted to establish the ICRC as a central PPP unit.
ICRC is the FGN’s agency charged with catalysing public
and private efforts/resources for the development and
implementation of a PPP framework for Nigeria. It also
co-ordinates and regulates all PPP initiatives of other
specialist ministries, agencies and parastatals of the FGN
–– Lagos State Public Private Partnership Law 2011
Establishes the PPP Office for the Lagos State
government. Which also doubles as the State’s Procure
Office under the Public Procurement law
–– Lagos State Public Procurement Law C51 2011
Establishes the Lagos State Public Procurement Agency
which makes regulations and policies for public
procurements and also enforces the procurement laws
of the State
53
 Construction pipeline
Energy infrastructure
• Ras Laffan Petrochemicals Complex , Ras Laffan
Industrial City, Northern Qatar
(Announced - completion due 2018)
• Al-Karaana Petrochemical Complex, Ras Laffan
Industrial City, Northern Qatar
(Announced - completion due 2018)
• Barzan Gas Project, Ras Laffan Industrial City,
Northern Qatar
(Ongoing - completion due 2022)
• Qatar Transmission Project, countrywide
(Ongoing - completion date pending)
Transport infrastructure
• New Doha Port Development, Mesaieed, Doha
(Ongoing - completion due 2016)
• Local Roads and Drainage Scheme, Doha
(Ongoing - completion due 2016)
• Qatar Integrated Rail Project, Doha-Bahrain-Kingdom
of Saudi Arabia
(Ongoing - first of four lines operational in 2019)
• Doha Bay Crossing/Sharq Crossing, Doha – Lusail
(Ongoing - completion due 2020)
• Doha, Lusail and Dukhan Highway Projects
(Ongoing - completion date pending)
Social infrastructure
• Msheireb Downtown Doha Regeneration Project
(2009-2016)
• Doha Festival City, Doha
(2012-2016)
• Inner Doha Re-sewerage Implementation Strategy
(IDRIS), Doha
(2012-2019)
• World Cup Stadiums, various locations
(Ongoing - completion due 2019)
• Lusail City Development, North of Doha
(2004-2020)
• Education City, West Doha
(Ongoing - completion due 2020)
54
Qatar
“The National Vision aims at transforming Qatar into an advanced country
by 2030, capable of sustaining its own development and providing for a high
standard of living for all of its people for generations to come. Qatar must invest
too in world class infrastructure to create a dynamic and more diversified
economy in which the private sector plays a prominent role.
Looking to the future, the government will work to ensure that the nation
develops a world-class infrastructure backbone, with projects set out in an
integrated national infrastructure master plan.
Priority infrastructure investments targeted for 2011–2016 include wastewater
treatment facilities, recycling centres, primary healthcare facilities, centres for
higher education and skills training, recreational spaces, and road and rail
connections. Government participation through public-private partnerships and
start-up investments will help jumpstart firms in new sectors of the economy.”1
- Qatar National Development Strategy 2011-2016
Key industry bodies
• Institute of Civil Engineers (ICE)
• Society of Construction Law (SCL)
• Chartered Institute of Arbitrators (CiARB)
• Qatar British Business Forum (QBBF)
Market facts
• USD 10.9 billion of construction and infrastructure contracts awarded
in 20122
• Third most active GCC construction market in 20123
• USD 220 billion of construction projects planned or under way4
• USD 117.5 billion pipeline of capital projects between 2012-20205
• USD 193.4 billion value of top 20 megaprojects6
• USD 22.7 billion value of megaprojects work currently awarded6
• USD 140 billion pipeline of transport infrastructure projects over
next five years7
1 Qatar National Development Strategy 2011-2016
2 Qatar’s construction boom gathers pace, MEED, February 2013
3 Qatar to invest over USD 200 billion in construction projects by 2022, Deloitte, July 2013
4 Qatar’s biggest projects: The top 20 megaprojects, MEED, February 2013
5 Qatar leads Gulf projects index, MEED, July 2013
6 Qatar’s biggest projects: The top 20 megaprojects, MEED, February 2013
7 Qatar to invest over USD 200 billion in construction projects by 2022, Deloitte, July 2013
55
 Construction
Contractual issues
–– Common forms of procurement include:
–– Traditional
–– Design and build
–– Management contracting
–– FIDIC is the main standard form contract used in the
region - it is frequently amended
–– Some governmental bodies have their own standard
forms of contract, which often include broad provisions
transferring risk to the contractor. Scope to negotiate the
terms of these contracts may be extremely limited, as
the request for proposals document will specify that the
consultant or contractor must agree to its terms in an un-
amended form
–– Decennial liability – contractors and consultants are
jointly liable for the total or partial collapse of a building/
structure and/or a defect threatening the stability or
safety of the building/structure for a period of 10 years
following handover. No fault is necessary in order for
liability to arise
–– There is a risk that a court order will be required legally
to terminate a contract. Legal advice should be obtained
before a party purports to terminate a contract pursuant
to its terms alone
–– Pay when paid clauses are frequently incorporated
in contracts and are generally considered as binding
in Qatar
–– Overall contractual liability often capped – value is
dependent on the nature of the work. There may be
carve-outs from the cap on liability in relation to sums
payable under indemnities given in respect of personal
injury, for example
56
PFI/PPP
Legislation Contractual issues
–– Law No. (22) of 2004 – The Qatar Civil Code –– Given the strength of the Qatari economy, the
Principal legislation concerning the interpretation of government has to date had no need to procure any
contracts – includes provisions dealing with contractual public funded projects on a PFI/PPP basis. As such,
damages and construction contracts there is no relevant legislation and there are no standard
form documents
–– Law No. (26) of 2005 (as amended) – Regulation of
Tenders & Auctions
Governs public tenders and procurement within Qatar
–– Law No 25 of 2004 Concerning Controlling the Cover-up
of Illegal Exercise by non Qatar nationals of Commercial,
Economical and Professional Activities in Violation of
the Law
Includes a prohibition against facilitating a non-Qatari
party from benefitting from economic activities in which
they are not permitted to engage under other Qatari laws
–– Law No. (13) of 2000 – Regulation of Foreign Capital
Investment in Economic Activity
Requires non-Qatari companies to form partnerships
with Qatari partners if they wish to operate within the
region (unless otherwise exempt)
–– Law No. (19) of 2005 – The Organisation of the Practice of
Engineering Professions and its executive regulations
Governs the practice of engineering and architecture
Insurance
–– Common types of insurance required under contract:
–– Professional indemnity where the contract involves
elements of design
–– Employer’s liability
–– Third party liability/public liability
–– Contractor’s all risks
–– An engineer which sets up an office in Qatar is required
to hold certain insurances, in particular professional
indemnity insurance
–– Cover for decennial liability is traditionally unavailable
in Qatar
57
 Construction pipeline
Energy infrastructure
• Offshore Platforms Filanovsky Field, Caspian Sea
(2013-2015)
• Far Eastern Petrochemical Company petrochemical
complex, Primorsk Region
(2013-2017)
• LNG plant, Vladivostok
(2013-2018)
• Russian Far East LNG Project
(2013-2019)
• Subsidy program to boost renewable energy output
(2013-2020)
Transport infrastructure
• Moscow-Kazan HSL Project
(2015-2018)
• Trans-Korean Main Line Project
(Ongoing - completion date pending)
• Sakhalin Bridge connecting Sakhalin Island to
Russian mainland
(Announced - dates pending)
• Modernisation of Baikal-Amur Mainline
(Announced - dates pending)
• Reconstruction of Trans-Siberian Railway
(Announced - dates pending)
Social infrastructure
• Construction of three Dreamworks theme parks -
Moscow, St Petersburg and Yekaterinburg
(2015 - completion date pending)
• FIFA World Cup 2018 - construction/renovation of
football stadiums in 13 Russian cities
• All-Russian Exhibition Centre renovation, Moscow
(Announced - dates pending)
58
Russia
“We made one more important decision – to invest 450 billion roubles into
infrastructure projects, on a repayable basis. In total, up to half of the National
Welfare Fund will be invested into projects on the territory of our country. …
Key conditions will be an assessment by private business that the projects are
viable and effective, and co-financed from their side.”1
- Vladimir Putin, 21 June 2013
Key industry bodies
• Federal Agency for Environmental Technical and Nuclear Supervision
• Ministry of Regional Development & Federal Agency for Construction
& Housing
• Self Regulation Organisations (SRO) for Construction/Design/Survey
Market facts
• Commercial construction market valued at USD 41.8 billion in 20122
• USD 94 billion foreign direct investment (FDI) into Russia over the past year
(as at January 2014) - 83% higher than in 20123
• Russian Direct Investment Fund (a USD 10 billion fund) has attracted
approximately USD 9 billion of foreign capital into joint investment projects
(as at January 2014)4
• Ranked third globally in terms of FDI volumes behind only the U.S.
and China5
• 40% of the National Welfare Fund’s assets allocated to investment projects,
including the modernisation of the Trans-Siberian and Baikal-Amur
railways and construction of the Central Ring Road outside Moscow
(January 2014)6
• 2018 FIFA World Cup (11 host cities, 12 stadiums, nine new constructions)
will support growth in all construction markets
1 Putin pledges USD 14 billion from wealth fund for Infrastructure, RIA Novosti, June 2013
2 Construction in Russia – Key Trends and Opportunities to 2017, June 2013
3 UNCTAD – Global Investment Trends Monitor No. 15, 28 January 2014
4 Russian Finance Ministry to use Welfare Fund to support Rosatom projects, ITAR-TASS News Agency, January 2014
5 UNCTAD – Global Investment Trends Monitor No. 15, 28 January 2014
6 Russian Finance Ministry to use Welfare Fund to support Rosatom projects, ITAR-TASS News Agency, January 2014
59
 Construction
Contractual issues
No standard form contracts. Generally hybrid contract used
in major projects combining FIDIC terms and mandatory
provisions under Russian law.
–– Responsibility and risk lies with contractor for accidental
loss/damage to facility before acceptance, even in cases
where loss/damage due to force majeure event. Phased
acceptance of the facility (and thereby earlier transfer of
risk of accidental loss/damage) should be considered
–– Contractor must warn employer and must suspend
work on discovery of unsuitable/improper quality of
material/equipment/technical documentation provided
by employer, of possible unfavourable consequences
to employer or other circumstances which threaten
suitability/soundness of the results of the work
performed/make it impossible to complete it on time
(Article 716 of Civil Code)
–– Contractor can limit liability to compensation for actual
damage, exclude loss of profits and interest, and for
specific types of actual damage
–– Caps on liability are enforceable
–– Contractual penalties are enforceable
–– Code specifies key characteristics of force majeure/
circumstances which will not constitute a force majeure
event
–– Contracts generally include provision for penalties/
damages and right to terminate for material delays.
Employer entitled to terminate if contractor delays in
start of work/impossibility of meeting deadline due to
slow performance of work
–– Additional work is recorded by addendum/additional
agreements to the contract
–– Work inspected either by regional or federal construction
supervisory authority
Legislation
–– Construction/Design/Survey
–– Civil Code – Chapter 37, Part 3 (Construction), Part
4 (Design & Survey) with general and mandatory
provisions for construction/design/survey contracts
–– The Town Planning Code No. 73-FZ (07 May 1998)
– planning/construction/improvement of urban/
rural settlements/engineering/transport/social
infrastructures and environmental protection
–– Technical Regulation on the Safety of Buildings
and Structures No. 384-FZ (30 December 2009) –
overarching technical regulation of construction
industry
–– National Standards (GOST) and Construction Norms
and Rules (SNiP) – technical regulations with specific
requirements for each stage of construction project,
including planning/survey/design and construction
60
–– Environment
–– On Environmental Protection No. 7-FZ dated 10
January 2002
–– The Land Code No. 136-FZ dated 25 October 2001
–– The Forest Code No.200-FZ dated 04 December 2006
–– On Natural Areas of Preferential Protection No. 33-FZ
dated 14 March 1995
–– On the Sanitary and Epidemiological Welfare of the
Public No. 52-FZ dated 30 March 1999
–– On Farm Land Turnover No. 101-FZ dated 24 July 2002
–– Air
–– On Protection of Atmospheric Air No. 96-FZ dated
04 May 1999
–– Water
–– The Water Code No. 74-FZ dated 03 June 2008
–– Waste
–– On Production and Consumption Waste No. 89-FZ
dated 24 June 1998
–– On Radioactive Waste Handling No. 190-FZ dated
11 July 2011
Interplay between laws for specific issues and main
piece of legislation, i.e. Civil Code, Town Planning Code,
Environmental Protection.
Insurance
–– Membership of a SRO entails compulsory third party
liability insurance
–– Construction All Risk
–– Erection All Risk
–– Professional indemnity – where contractor responsible
for design
–– Product liability – where product incorporated into
contract works
Other considerations
–– Regulatory licenses, permits and consents relevant to
contractors include:
–– Membership of relevant SRO
–– Governmental expert review of design documentation
/engineering surveys
–– Technical conditions for connecting to the public
utilities
–– Construction permit from the Federal, Regional
or local government
–– Inspections within framework of state control over
construction (GSN) and Opinion on Compliance
(ZOS), certifying compliance of project with applicable
technical regulations/laws and approved design
documentation
–– Commissioning certificate from the federal, regional
or local government
The law On Concession Agreements permits foreign
governing law but not international arbitration; regional PPP
laws are more flexible in this regard.
–– Procurement Laws where government entity
customers involved Oil and gas infrastructure may not be the subject of
–– Usually, major government-backed construction concession or regional PPP laws.
projects are organised by state-owned corporations Legislation
(e.g. Olympstroy, the Customer for Sochi Olympics –– Civil Code – Chapter 37, Part 5
construction projects). Procurement rules are less strict
–– On Concession Agreements No. 115-FZ dated 21 July 2005
and focused more on disclosure and transparency than
–– On Placing Orders for Goods, Works and Services for State
on restricting freedom of contract
and Municipal Needs No. 94-FZ dated 21 July 2005 (to
be replaced from 01 January 2014 with On the Contract
PFI/PPP System for Procuring Goods, Works and Services for State
Market overview and Municipal Needs No. 44-FZ dated 5 April 2013)
The stated mission of the PPP Centre at Vnesheconombank –– On Procurement of Goods, Works, Services by Certain
(State Corporate Bank for Development) is “to ensure Types of Legal Entities No. 223-FZ dated 18 July 2011
support and accelerate development of federal, regional or
–– On Production Sharing Agreements No. 225-FZ dated
municipal infrastructure projects and enhance quality of
30 December 1995
public services through the application of a range of PPP
instruments.”7 –– On Capital Investments in the Russian Federation No.
39-FZ dated 25 January 1999
This is a developing sector in Russia. There have been a
–– Regional PPP Legislation – e.g. On the Participation of
number of major PPP projects concerning waste processing,
St Petersburg in Public-Private Partnerships No. 627
road construction, city toll road, upgrading of airports, high
dated 20 December 2006, and on investments and public-
speed rail link, port terminals and utilities. Generally the
private partnership in Penza Oblast No. 1755-PRL dated
projects are structured as concession agreements.
30 June 2009
The form of PPP under the Federal Law On Concession
Agreements is similar to BTO. In the absence of Federal Law
catering for other PPP models (BOOT, BOT, BOO), there is a
risk that Russian courts may construe agreements between
public customer and a private contractor as a concession
agreement and therefore invalidate transfers of ownership
to a private contractor. There are mandatory model
concession agreements for different sectors (rail, transport,
utilities, health care, etc).
In April 2013, a draft of the Federal Law On the Basis of
Public Private Partnership (PPP) passed the first reading in
the State Duma. Currently, the draft does not restrict the
freedom of parties to choose a form of PPP and does not
prescribe bidding rules for PPP tenders.
In 2010, the PPP Expert Council of the State Duma developed
a model law on PPP which encouraged regions to adopt
their own regional PPP legislation. So far 69 regions have
adopted local PPP laws or regulations. Regional legislation
permits the use of forms, other than concession type PPP,
including PFI. However again there is a risk that in the event
of dispute, if there is inconsistency between the Federal Law
and Regional Law, the Federal Law will prevail.
7 PPP Centre overview, Public-Private Partnership Centre of Vnesheconombank, 2012
61
 Construction pipeline
Energy infrastructure
• Singapore will encourage new electricity generation
plantings and explore a suitable framework for the
future import of LNG. To manage energy demand, it will
support companies investing in Energy Efficiency (EE)
projects through the existing Grant for Energy Efficient
Technologies (GREET) scheme, and will launch a third-
party EE financing pilot targeted at industrial users4
Transport infrastructure
• Downtown MRT Rail Line, Northwest-East Singapore
(Stage 1: 2008-2013; stage 2: 2009-2015;
stage 3: 2011-2017)
• Changi Terminal 4, Changi
(2013-2017)
• Pasir Panjang Port Terminal Expansion,
South Western Singapore
(2012-2020)
• Singapore – Express High Speed Rail,
Singapore-Kuala Lumpur
(2014-2020)
Social infrastructure
• Singapore Sports Hub, Kallang
(2010-2014)
Singapore
“We want Singapore to continue to be one of the best places to live in the world –
a city for all age groups, and a country we are proud to call home.
We will invest in our infrastructure and create high quality urban spaces,
offering convenient access to amenities, transport nodes and services. Our rail
network will expand by about 100 km to a total length of 280 km by 2021. We
will build more public housing, hospitals and care facilities.
By planning our infrastructure developments well in advance, and implementing
them in a timely and effective way, we can overcome our current strains and
congestion, and accommodate a larger population.”1
- A Sustainable Population for a Dynamic Singapore, January 2013
Key industry bodies
• Building and Construction Authority
• Centre for Public Project Management (CP2M)
• Institute of Engineers, Singapore (IES)
• Association of Consulting Engineers Singapore (ACES)
• Singapore Institute of Architects (SIA)
• Singapore Institute of Surveyors and Valuers (SISV)
Market facts
• SGD 3,654.2 million of construction in Q2 of 20132
• 6.1% increase in construction gross domestic product (GDP) in Q2 of 20132
• Ranked by the World Bank as the easiest country in which to do business
seven years running3
• 17% increase in U.S. foreign direct investment (FDI) in 20123

1 Population White Paper: A Sustainable Population for a Dynamic Singapore, The National Population and Talent Division,
January 2013
2 Statistical Tables from Economic Survey of Singapore, Singapore Department of Statistics
3 Singapore-U.S. Trade High to Persist on Record FDI Level, Bloomberg, August 2013
4 Expenditure Overview, Singapore Budget 2013, Government of Singapore

62 63
 Construction
Contractual issues
–– Common forms of procurement include:
–– Traditional
–– Design and build
–– Management contracting
–– In addition to contract law, the law of tort and applicable
legislation will shape the parties’ rights and obligations
–– Standard form contracts are used for public and private
sector projects, including:
–– Singapore Institute of Architects (SIA) Conditions of
Appointment
–– Association of Consulting Engineers, Singapore
–– Public Sector Standard Conditions of Contract for
Construction Works (PSSCOC)
–– Public Sector Standard Conditions of Contract for
Design and Build
–– REDAS Design and Build Conditions of Contract
–– Performance bonds of between 5-10% of the contract price
are often required to cover the contractor’s performance
whilst on site and during the defects liability period
64
Legislation
–– Building Control Act, Cap 29 and Building Control
Regulations 2003
Specifies standards of safety and good building practice
as well as a system of inspection and approval of Building
Works
–– Building and Construction Industry Security of Payment
Act 2004 and Building and Construction Industry
Security of Payment Regulations 2004
Seeks to facilitate and promote sound payment practices
by requiring progress payments and enabling the parties
to take payment disputes to adjudication
–– Professional Engineers Act, Cap 253 and Architects
Act, Cap 12
Regulates the conduct of engineers and architects
Insurance
Common types of insurance include:
–– Public liability insurance: cover for third party liability for
bodily injury or property damage (could alternatively be
covered under an All Risk policy)
–– Contractor’s All Risk: cover for the contract works during
the construction period against loss or damage and for
third party liability for bodily injury or property damage
–– Professional indemnity insurance: cover for the
Contractor’s negligence in relation to design work
Other considerations
–– Singapore is very open to FDI, and has many policies
in place to support it, including a comparatively low
corporate tax scheme and investment incentives such as
double taxation agreements and investment guarantee
agreements
–– For public projects over SGD 70,000, a tendering process
is conducted either on an ‘open’, selective or limited basis,
depending on the nature of the project
PFI/PPP
Contractual issues
–– Unlike other jurisdictions, there is no specific piece
of legislation that governs the PPP process – the Ministry
of Finance is responsible for setting out PPP policies
and guidelines
–– The PPP initiative is based on a hybrid of both the UK’s PFI
scheme and Australia’s PPP framework
–– PPP models that may be used include:
–– Design Build Operate (DBO)
–– Design Build Finance Operate (DBFO) (most common)
–– Models proposed by the private sector
–– Project agreements tend to be between 15 – 30 years
Legislation
–– Public Private Partnership Manual Version 2, 2012
Government Procurement Entities are required to
comply with the procurement procedures set out in this
guide when tendering for PPP work
Insurance
–– Insurance requirements for PPP projects are similar to
those under other types of construction projects
–– Parties will also need to consider requirements for
property and asset insurance during the project’s
operational phase
Other considerations
–– PPP Handbook released in 2004 which actively encouraged
the use of PPP models for which prominent projects,
including the Singapore Sports Hub and Tuas Desalination
Plant have since been procured. A new version was
published in March 2012, however, no new projects have
been procured on a PPP basis since 2010
65
 Construction pipeline
Energy infrastructure
Spain
• Improvement, management and operation of three [Spain] called on the European Union, in the coming months, and
major water treatment and desalination plants, together with reforms at a national level, to take as many measures
Catalonia as are necessary to foster growth and competition, thereby acting as
(Announced - dates pending) a catalyst to ensure the positive impact of reforms and adjustments
Transport infrastructure being made by Member States:
• Benavente-Zamora A66 road (Autovia de la Plata) ––Affirmed the importance of creating conditions to ensure investment
connecting Gijon and Sevilla
(Announced - dates pending)
in the economy, particularly to support small- and medium-sized
enterprises, as well as micro-enterprises, through the European
• Autovia del Olivar; Autovia del Almanzora; Valencia-
Castellón line; A362 motorway; Cuenca Minera highway Investment Bank, among other institutions, and by means of as many
instruments as exist to that end
Social infrastructure
• Cordoba Courthouse Project, Andalucia ––Highlighted the importance of the Cohesion Policy as the backbone
(Ongoing - completion date pending) of social and economic development in the EU, and as a catalyst
for growth in Europe, considering it is necessary to guarantee that
the Cohesion Policy complements other EU policies to ensure the
maximum impact of EU investments within the framework of strict
budgetary discipline that exists in Europe
––Affirmed the necessity of the future of the economies of the two
countries and of the EU as a whole being based on a model of
strong, diversified and sustainable growth that serves to generate
employment, human capital, investment and innovation
––To those ends, suggested that the EU drive a policy of
competitiveness, fostering a pro-competition regulatory framework
and adopting structural reforms to remove their main macro-
economic imbalances1
- President of the Government of Spain Joint Statement

Key industry bodies

• Colegio de Ingenieros de Caminos, Canales y Puertos (CICCP)
• Spanish Council for Architectural Technology
• Superior Council of Colleges of Architects of Spain
Market facts
• Economy contracted by 1.4% in 2012 and is expected to shrink by a further
1.5% by the end of 2013 - though trend is expected to reverse for 2014 (0.9%)
• Inflation was 2.4% in 2012 and is expected to fall to 1.5% by the end of 2013
and to 0.8% the next year
• Transport sector received 26% and urban infrastructure 3% of 2012 budget
• EUR 9.6 billion budgeted for transport infrastructure in 2013

1 President of the government of Spain joint statement, 26th Spain-Portugal Summit, May 2013

66 67
 Construction
Contractual issues
–– Turnkey contracts are often used. The contractor holds
all the risks and liability until handover with the only
exception of act of God events. Contracts typically
establish the penalties for lack of compliance with the
established milestones
–– A guarantee term (typically ranging between 18-24
months) is granted. Sub-contracts are normally allowed
but this does not limit the main contractors liability to the
employer/developer
–– Disputes are normally submitted to civil courts.
Arbitration is less frequent, but increasingly used
Legislation
European
The 2006 Technical Code for Building (Código Técnico
de la Edificación) is the rule governing the construction
of buildings (project, construction, maintenance,
conservation).
–– Eurocodes (European technical standards) are the Europe-
wide means for the structural design of buildings and
other civil and engineering works, covering:
–– Basis of structural design (EN 1990)
–– Actions on structures (EN 1991)
–– Concrete structures (EN 1992), steel (EN 1993),
Composite steel and concrete (EN 1994), timber (EN
1995), masonry (EN 1996) and aluminium structures
(EN 1999), together with geotechnical design (EN 1997)
–– The design, assessment and retrofitting of structures for
earthquake resistance (EN 1998)
–– According to the Public Procurement Directives
(2004/17/EC and 2004/18/EC), contracting authorities
in the EU must allow the use of the Eurocodes in
structural design aspects of tenders falling within the
scope of these Directives
–– In addition, to implement the Internal Market for services
(engineering and contracting) and structural construction
products, the Commission Recommendation 2003/887/EC
of 11 December 2003 strongly encourages the EU Member
States to take on board the Eurocodes as their national
design codes
68
Insurance
–– Professional indemnity Insurance is required for
Architects, Technical Architects and Engineers
–– Property damage all risks insurance (with or without
liability section)
–– Public liability insurance
–– In case of residential buildings decennial liability
insurance must be taken out by contractors to cover costs
associated with the potential collapse of the building
after completion. The names derives from the fact that it
covers the ten year period after handover and completion
of the project
PFI/PPP
Contractual issues
There is no standard form for PFI and PPP contracts. As
a general rule, the contractor (the concessionaire) shall
bear site risk, legislation changes risk, construction risk
and demand risk; however, it is often agreed that the
concessionaire is entitled to compensation by the Public
Authorities or additional payment measures in case that
the balance of the contract has been broken because of
circumstances beyond the contractual forecasts.
Contracts with the Spanish Public Authorities cannot
be submitted to arbitration The contracts are subject
to Spanish law and competence falls with the
administrative courts.
Legislation
The main rule is the Act of Public Sector Contracts which
was approved by means of Royal Decree 11/2003. It intends
to harmonise the diversity of rules formerly governing this
matter (namely Act 30/2007 and Act 13/2003). The general
principle is the freedom of the parties to agreed the terms
of the contract (section 25) which in any event has to meet a
minimum content (section 26).
This recent act contains a specific section concerning public
works concession contracts (the concession model has been
and currently is the main vehicle for the development of PPP
in Spain) and includes procurement provisions.
However, any public contracts awarded under the Previous
Act as well as those initiated before the entry into force of
the Public Sector Contracts Act will continue to be regulated
by the earlier legislation.
Insurance
–– Insurance cover will typically be the responsibility of
the contractor. The public tender conditions do normally
detail the coverage to be obtained: typically, property
damage all risk and liability for the construction and the
O&M phases
69
 Construction pipeline
Energy infrastructure
• Mtwara-Dar Gas pipeline construction, Mtwara-Kilwa
District-Dar es Salaam
(2012-2014)
• SONGAS gas-electricity PPP
(2003 - completion date pending)
• Kinyerezi Power Project, Dar es Salaam
(Announced - dates pending)
Transport infrastructure
• Tanga-Arusha-Musoma-Kampala Railway Line
(2011 - completion date pending)
• Bagamoyo, Tanga and Musoma port developments
(2014 - completion date pending)
Social infrasturucture
• 14 countrywide water development projects funded by
the Water Sector Development Programme - USD 286
million allocated by the government during 2013-20144
• Abbott Fund PPP to strengthen country’s healthcare
system; fund invested more than USD 95 million to date
(Ongoing - completion date pending)
70
Tanzania
“The Government of Tanzania is committed to the pursuit of sound, consistent
and predictable macro-economic policies with low inflation. The policy
stance is one of building on the foundations and successes, and scaling-up
implementation and policy with new vigour, new zeal, and new speed. The
promotion of good governance, adherence to the rule of law, promotion of
private sector development and opening-up new areas with high economic
potential are key issues.
The government strongly encourages private sector participation in development
financing. To that end, the government has laid out clear policy, legal and
regulatory frameworks. Specifically, PPP arrangement will be used to finance
priority development projects including infrastructure projects.”1
- Guidelines for the Preparation of Annual Plan and Budget 2012/2013
Key industry bodies
• Architects and Quantity Surveyors Registration Board (AQRB)
• Contractors Registration Board (CRB)
• Engineers Registration Board (ERB)
• Public Procurement Regulatory Authority (PPRA)
Market facts
• 8% increase in construction sector activities over the past five years
• Increased government spending on infrastructure from USD 1.2 billion in
the 2012-13 fiscal year to USD 1.34 billion in the 2013-14 fiscal year
• USD 1 million allocated towards raising generation, transmission and
distribution of electricity in the 2013-14 fiscal year2
• USD 1.7 billion allocated for roads in the 2013-14 budget3
1 Guidelines for the Preparation of Annual Plan and Budget for 2012/2013 in the Implementation of the Five Year
Development Plan 201/12-2015/16, The United Republic of Tanzania, February 2012
2 National Bureau of Statistics Tanzania
3 Performance Audit 2009-2010, National Audit Office of Tanzania
4 National Bureau of Statistics Tanzania
71
 Construction
Contractual issues
–– Standard form contracts are commonly based on
National Construction Council’s template agreement
and schedule of conditions
–– Contractors expected to maintain liquid assets
equivalent to at least three times the monthly cash
flow of the project
–– Contracts typically include anti-corruption clauses
Legislation
–– The Local Government Urban Authorities Act
Principal statute affecting construction projects
–– The Town and Country Planning Act 2002
Framework for building design, building consent
and land use
–– Environmental Management Act, 2004
Framework for environmental requirements in
construction projects
–– The Land Act 1999
Provides over all guidelines for the management of land,
leases and land dispute settlement
72
Insurance
Projects must hold:
–– Contractors all risks insurance: damage to works
and site materials
–– Public liability insurance: damage, injury and death
to third parties
Most projects will have:
–– Insurance against poor performance by the contractor
Other considerations
–– Permission from environmental and local governmental
authorities are required prior to construction
–– Companies engaged in construction related activities are
required to register with their professional registration
boards before offering services to the public
–– All persons or companies that hold themselves out as
contractors or that undertake contractors’ work need to
be registered with the Contractors Registration Board
PFI/PPP
Contractual issues
–– Contracting authority is the body that procures and
signs the project agreement and performs contract
management for the duration of the contract
–– For unsolicited bids, the contracting authority will
amend any project agreement in line with the legal
opinion of the Attorney General
Legislation
–– The Public Private Partnership Act No. 18 of 2010 (the
Act) as enforced by The Public Private Partnership
Regulations 2011
Establishes a legal and institutional framework to guide
investment in PPP projects
–– Public Procurement Act
Dictates that all PPP projects shall be procured through
an open and competitive bidding process
Insurance
Projects must hold:
–– Contractors all risks insurance: damage to works and
site materials
–– Public liability insurance: damage, injury and death
to third parties
Other considerations
–– If bids are unsolicited bids they do not have to put up for
public tender however, all solicited bids will have to be
–– A feasibility study must be carried out before the project
is submitted to ministerial/governmental level
73
 Construction pipeline
Energy infrastructure
• Evrencik WEPP wind farm, Marmara
(final phase: 2014 - completion date pending)
• Second nuclear power plant, Sinop
(Announced - completion due 2023)
• 3,500MW thermal power plant, Afyon
(Announced - dates pending)
Transport infrastructure
• Yavuz Sultan Selim Bridge (initially named Third
Bosphorus bridge), Istanbul
(2013-2015)
• Istanbul-Izmir Highway
(2013-2016)
• Eurasia Tunnel Project, Kazlicesme-Goztepe, Istanbul
(Ongoing - completion due 2017)
• Third Istanbul Airport, Istanbul
(2017-2019)
• Galataport Project, Istanbul
(Announced - dates pending)
• Kanal Istanbul, Aegean Sea-Mediterranean Sea
(2013-2023)
Social infrastructure
• Tarlabası Renewal Project, Istanbul
(2007-2015)
• Ankara Etlik/Ankara Bilkent Integrated Health
Campuses, Ankara
(2013-2017)
• Fener-Balat-Ayvansaray Renovation Project
(Ongoing - completion date pending)
Turkey
“The government’s ambitious vision for 2023, the centennial foundation of the
Republic, envisages grandiose targets for infrastructure. The overall target is to
make Turkey one of the top 10 economies in the world.
The national and local authorities in Turkey have been implementing numerous
infrastructure projects through Public and Private Partnership (PPP) and they are
also keen to realize further infrastructure projects in education, energy, defense,
health, transportation and other public services.”1
- Infrastructure Overview, Invest in Turkey
Key industry bodies
• The Turkish Contractors Association
• Ministry of Environment and Urban Development
• Association of Turkish Consulting Engineers and Architects
• Turkish Contracting and Engineering Services
• Republic of Turkey of Prime Ministry Housing Development
Administration of Turkey
Market facts
• USD 26.1 billion value of overseas projects secured by Turkish
construction industry in 20122
• USD 400 billion pipeline investment for urban renewal projects over
next 10 years3
• 441 construction projects undertaken in 20124
• USD 35 billion value of 134 PPP projects in 20115
• 31 Turkish contractors ranked among ‘The World’s Top 225 International
Contractors’ in 20116

1 Infrastructure Overview, Invest in Turkey

2 Turkey’s overseas construction projects worth 26.1 bln USD in 2012, Xinhua, January 2013
3 Infrastructure Investment in Turkey, Investment Support and Promotion Agency of Turkey, February 2013
4 Turkish Contracting and Engineering Services, Republic of Turkey Ministry of Economy, 2012
5 Infrastructure Investment in Turkey, Investment Support and Promotion Agency of Turkey, February 2013
6 Construction industry in Turkey: facts and figures, Novron, December 2012

74 75
 Construction
Contractual issues
–– For overseas contracting, regional or international format
contracts such as FIDIC contracts are used
–– Standard form contracts are widely used
–– Arbitration is often used when there is international
financing/international partner involvement
–– Swiss law is sometimes put forward as a neutral
option for choice of law (Turkish law is based on the
Swiss Civil Code
Legislation
–– The Turkish Code of Obligations
–– Law Regarding the Protection of the Worn Historical and
Cultural Immovable Properties through Renovation and
the Use of the Same by Conservation
–– The Public Tender Act
–– Turkish law is a civil law system and so it requires a
positive permission or right to carry out any particular
activity and there are many matters regulated directly by
law which cannot be amended by contract
Insurance
Common types of insurance required under contract:
–– Contractor’s All Risk ‘CAR’ (All risks for construction)
–– Erection All Risks ‘EAR’ (All risks for assembly)
–– Accredited Plant and Equipment Insurance ‘CPA’
(Equipment Insurance)
76
PFI/PPP
As previously mentioned, true PPP projects are still to be
developed and we are not aware of any projects which have
come to full completion or have passed the construction
phase and moved to the phase of service provision
Nevertheless, there is much talk of this model and provided
the Turkish economy and banking system continues to
improve, the model may be more fully adopted
Legislation
–– Law No. 6428 (also known as the new Healthcare
PPP Law)
Replaces Additional Article 7 of Law No. 3359, the
Law on Healthcare Services (which introduced the
build-lease-transfer PPP model into Turkey’s healthcare
sector in 2005.) In addition to introducing changes to
the healthcare PPP regulatory framework, the
Healthcare PPP Law specifically addresses certain
legal challenges encountered by healthcare PPP projects
under previous legislation
Turkish Code of Obligations, Law Regarding the
Protection of the Worn Historical and Cultural
Immovable Properties through Renovation and the Use
of the Same by Conservation, Public Tender Act. There is
a draft PPP law but it has not been progressing very fast
since there appear to be other priorities at present
Insurance
–– Construction phase:
Construction insurance commonly covers risks and
damage occurring at the construction site. Insurance fee
is determined according to the value of the equipment
and work of the construction (including tax, customs,
labour and transport expenses) as well as the machines
and tools used for the construction and current market
value of the outbuildings
Commonly, coverage starts as of the transfer of
equipment to the construction site and terminates with
the delivery at completion of the construction to the
owner. Upon request, it is also possible to provide cover,
for wreck removal, third party indemnity insurance and
the risks of earthquake, strike and lock-out
–– Operational phase:
Standard insurance is provided in order to cover
usual risks of loss and damage during operations,
including public liability, plant and common risk
property insurance
With contribution from:
Jonathan Blythe
Senguler & Senguler Law Office, Istanbul
T: +90 212 361 50 66
E: jonathan.blythe@eurasia.com.tr
77
 Construction pipeline
Energy infrastructure
• Umm Lulu Development Project, Abu Dhabi
(Ongoing - completion due 2018)
• Dubai Electricity and Water Authority 1200 MW Clean
Coal Power Plant, Dubai
(Announced - first phase completion due 2020)
• Upper Zakum Field development extension, Arabian
Gulf, Abu Dhabi
(Ongoing - completion date pending)
• EmiratesLNG import gas terminal, Port of Fujairah
(Announced - dates pending)
Transport infrastructure
• Al Sufouh Tram
(Ongoing - first phase completion due 2014)
• Dubai Metro expansion projects
(Ongoing - three new metro lines and Jumeirah tram route due
for completion in 2030
Social infrastructure
• IMG Worlds of Adventure theme park, Dubai
(Ongoing - completion due 2014)
• Madinat Jumeirah expansion
(Announced - completion due 2015)
• Dubai Creek Extension Project, Business Bay
(Announced - completion due 2016)
• Mohammed bin Rashid (MBR) City, Dubai
(Announced - completion due 2018-19)
• Al Amal Hospital, Al Ruwaayah, Dubai
(Announced - dates pending)
• Creek Panorama pedestrian bridge, Bur Dubai -
Shindagha
(Announced - dates pending)
78
United Arab Emirates
“The United Arab Emirates (UAE) is a federation of seven Emirates (states),
the largest of which are Abu Dhabi (the capital city) and Dubai. Both of the
Abu Dhabi and Dubai municipalities have individually established ambitious
plans (the Abu Dhabi Economic Vision 2030 and Dubai Strategic Plan 2015
respectively) to ensure the continued growth and development of their
respective Emirates.
Abu Dhabi:
By 2030, Abu Dhabi intends to build a sustainable and diversified, high value-
added economy that is well integrated into the global economy and that provides
more accessible and higher-value opportunities for all its citizens and residents.1
Dubai:
The government of Dubai will focus on delivering its mission of achieving
comprehensive development and building human resources, promoting economic
development and government modernisation, sustaining growth and prosperity,
protecting Nationals’ interests, public interest and wellbeing and providing an
environment conductive for growth and prosperity in all sectors.”2
- Abu Dhabi Economic Vision 2030/Dubai Strategic Plan 2015
Key industry bodies
• Build Safe UAE
• UAE Contractors Association
• UAE Society of Engineers
• Emirates Green Building Council
Market facts
• Dubai has been awarded the honour of hosting the World Expo 2020 -
making it the first Expo to take place in the Middle East, North Africa and
South Asia region
• USD 43 billion of infrastructure investment required in Dubai to host
Expo 2020
• USD 549 billion estimated total value of projects planned or underway in
the UAE
• USD 30 billion worth of construction and infrastructure projects awarded
in 2013
• USD 82 billion worth of projects currently underway in Abu Dhabi alone,
including USD 37 billion projects in the oil & gas sector and USD 26.7 billion
worth of real estate and construction projects
• USD 25 billion to be spent on railway infrastructure over the next decade
• USD 200 billion plus worth of planned and unplanned projects
1 The Abu Dhabi Economic Vision 2030, Abu Dhabi Council For Economic Development, 2009
2 Dubai Strategic Plan 2015, Government of Dubai, February 2007
79
 Construction
Contractual issues
–– Common forms of construction procurement include:
–– Traditional
–– Design and build
–– Construction management
–– FIDIC is the most commonly used standard form contract
but is almost always amended. FIDIC Red Book 4th edition
1987 is still in use, although 1st edition 1999 is becoming
more common
–– An Abu Dhabi standard form construction contract is
prescribed by law and used by Abu Dhabi government
departments. It is based on FIDIC
–– Decennial liability – contractors and consultants are
jointly liable for the total or partial collapse of a building/
structure and/or a defect threatening the stability or
safety of the building/structure for a period of 10 years
following completion. No fault is necessary in order for
liability to arise
–– Caps on liability and liquidated damages – contracting
parties are free to prescribe compensation, but in certain
circumstances the clauses may be opened up and
reviewed by the local Courts
–– Pay when paid clauses – generally recognised under UAE
law and will be considered binding
–– Termination – there is a risk that a court order will be
necessary to legally terminate a contract, so legal advice
should be obtained before a party purports to terminate a
contract pursuant to its terms alone
–– Boycott of Israel legislation – although rarely enforced
within the UAE, American companies contracting in the
UAE should be aware that entering into contracts that
oblige it to comply with local law may potentially breach
anti-boycott laws in America
80
Key legislation
–– Federal Law No. 5 of 1987 (UAE Civil Code)
The principle legislation in the UAE that contains a
section comprising twenty-four clauses on Muqawala –
contracts for works and services. These articles cover an
extensive range of construction related matters, including
the obligations of contractors, employers, subcontracting
and termination
–– Federal Law No. 11 of 1992 (UAE Civil Procedure Code)
Although not aimed exclusively at construction contracts,
the UAE Civil Procedure Code does contain provisions
that apply incidentally to construction contracts, such as
arbitration and the recoverability of interest
–– Abu Dhabi Law No. 21 of 2006
Prescribes a standard form construction contract to be
used by Abu Dhabi government departments
–– Abu Dhabi Law No. 6 of 2008 (Abu Dhabi
Procurement Law)
Governs the public tendering processes of Abu Dhabi
government departments and includes a code of best
practice ‘guidebook’
–– Dubai Law No. 6 on Contracts of Government
Departments
Governs the public tendering processes of, and contract
negotiations with, Dubai government departments
Insurance
–– Common types of insurance include:
–– Contractors All Risks/Erectors All Risks – insurance
for works and equipment
–– Third Party Liabilities/Public Liability – Personal injury
and property damage
–– Workers’ compensation
–– Professional indemnity insurance: professional
negligence where the contractor is responsible
for design
–– Full cover for decennial liability is not yet effectively
available in the UAE, however, amendments to CAR
policies are occasionally seen in an attempt to extend
cover (albeit uncommon)
PFI/PPP
Contractual issues
–– From time to time, the UAE engages in PPPs
–– Examples of PPPs that the UAE has implemented
(or seeks to implement) include such projects and
services as:
–– Water and sewerage provision
–– Desalination plants
–– Telecommunications
–– Airport and seaport services
–– Railroads
–– Building and operating public markets, slaughterhouses
and parks; and
–– Building and maintaining education buildings
–– There are no standard forms of PPP agreements or
contracts. For PPPs undertaken to date in the UAE,
bespoke construction contracts have been used so that
developers can match off risk with head concession
agreements
–– There is no specific procurement/tender process for a
PPP transaction. The PPP tender process operates under
the procurement laws in the same way that typical
procurements do
–– Since risks arising in the course of construction may bring
down the entire project, those risks are normally passed
on by the concessionaire to the independent contractor
(an EPC contractor)
Key legislation
–– Dubai is currently in the process of formulating a draft
PPP law at Emirate level, but no timescale has been
indicated for its coming in to force
–– There has been some reports in the local press that a PPP
law has recently been drafted in Dubai by the Roads and
Transportation Authority
Insurance
–– The concessionaire’s liability is tied up with the head
concession agreement
–– Normally, the concessionaires carry insurance against
liabilities arising under the head concession agreement,
such as liability for claims, damages, losses and expenses.
This applies despite the fact that the concessionaires
usually pass on all the risks to the contractor. It is also
in the concessionaire’s own interest to insure against
financial risks
–– The grantor and lenders must also scrutinize the
insurance arrangements, since they have to be safe when
it comes to guarantees of stable cash-flow generation and
due provision of the relevant services
–– The grantor (i.e. the government entity) guarantees the
fixed payment under an off-take agreement (or any other
payments under similar arrangement) to enhance the
financial viability of the PPP project
81
 Construction pipeline
Energy infrastructure
United Kingdom
• Derbyshire Waste Management, Midlands, England “The Government is determined to succeed in the global race by creating growth
(2014-2017) and delivering lasting prosperity. To build a strong economy, necessary for a
• Peterhead Carbon Capture and Storage Project, Scotland fairer society, the UK needs infrastructure that competes with the best in the
(2015-2017) world. Long-term investment in infrastructure helps in rebalancing the economy,
• Immingham Renewable Fuels Terminal, enhances productivity and creates jobs. It also means the UK is ready to face
North East England new challenges such as population growth and climate change and take full
(2013-2028)
advantage of new technologies. The UK needs transport and communications
• High Heavens Waste Transfer Station, networks that connect people and businesses; resilient, cost effective and
South East England
(2015 - completion date pending)
sustainable energy supplies; and the science infrastructure which can give UK
industry the edge over our competitors. 21st century infrastructure is needed for
Transport infrastructure a 21st century Britain.”1
• Crossrail, London and the South East
(2009-2017) - Investing in Britain’s Future 2013
• Mersey Gateway Bridge Project, North West England
(2014-2017) Key industry bodies
• High Speed 2 Rail, London to the North • Association of Consulting Engineers (ACE)
(2017-2026) • Construction Industry Council (CIC)
• M4 Road, Wales • Institution of Chemical Engineers (IChemE)
(Announced - dates pending)
• Royal Institute of British Architects (RIBA)
Social infrastructure
• Royal Institution of Chartered Surveyors (RICS)
• Windsor Park Stadium, Northern Ireland
(2014-2016) • Technology & Construction Bar Association (TECBAR)
• Stoke on Trent ‘extra care’ homes, Midlands, England Market facts
(2014-2017)
• GBP 23.7 billion of construction in Q1 of 20132; the industry returned
• Dumfries & Galloway Hospital, Scotland
to growth and reached its highest level of activity for three years
(2015-2018)
during 20133
• Yorkshire School Development, Northern England
(Announced - dates pending) • GBP 375 billion pipeline of government projects to 2020 and beyond4
• GBP 54.2 billion of PFI projects in 20135
• 725 PFI projects in 20136
• GBP 3.5 billion of investment for purchase of new build homes under
the government’s Help to Buy Scheme7

1 Investing in Britain’s Future, HM Treasury and Infrastructure UK, June 2013

2 UK construction sector reviving, ONS figures show, BBC, July 2013
3 Markit / CIPS Construction Purchasing Managers’ Index
4 National Infrastructure Plan 2013, HM Treasury and Infrastructure UK
5 GBP 109 billion of future construction opportunities up for grabs, Cabinet Office and Efficiency and Reform Group,
August 2013
6 UK PFI Projects: Summary data as at March 2013, UK Government
7 Help for home buyers, Department for Communities and Local Government, October 2013

82 83
 Construction
Contractual issues
–– Common forms of contract procurement include:
–– Traditional
–– Design and build
–– Management and contracting
–– Standard form contracts – e.g. Joint Contracts Tribunal
(JCT) – are widely used, but rarely without amendments
–– Responsibility for design is generally not held by the
contractor under traditional procurement mechanisms
–– Unforeseen ground conditions do not require a standard
contractual approach, but a client can instruct a ground
survey at the contractor’s risk
–– Liability can be excluded, other than for death or personal
injury, by express wording in the contract. However it is
more common for a cap on liability to be agreed, usually
by reference to the obligatory professional indemnity
insurance held by the contractor
–– Liquidated and ascertained damages (LADs) are often
included for contractor delays but are only enforceable if
a genuine pre-estimate of loss. Client delays are typically
addressed by granting the contractor an entitlement to
an extension of time (EOT) and/or additional payment for
defined compensation events
Legislation
–– Housing Grants, Construction and Regeneration Act
1996 (as amended by the Local Democracy, Economic
Development and Construction Act 2009)
The principal statue affecting commercial construction
and engineering projects prescribes regular payments
and gives either party to a construction contract the right
to adjudicate at any time
–– Health and Safety at Work Act 1974 and the Construction
(Design and Management) Regulations 2007 (CDM
Regulations)
Relevant legislation imposing duties on clients to ensure
the health and safety of workers, and to put certain
procedures in place to that end. A revision of the CDM
regulations was anticipated in 2014 but has been delayed
Insurance
–– Common types of insurance required under contract:
–– All risks insurance: damage to works and site materials
–– Professional indemnity insurance: professional
negligence where the contractor is responsible
for design
–– Public liability insurance: damage, injury and death to
third parties [damage to third party property]
–– Product liability insurance: damage and injury arising
from products incorporated within the contract works
84
PFI/PPP
Contractual issues Insurance
–– The Private Finance Initiative (PFI) was first implemented –– The Project Company organises the project insurances
in the UK in 1992 and was widely used until 2010. As where the public sector and the private sector participants
of March 2013 there were 725 PFI projects in the UK are joint named insured including contractor’s all risks,
with a combined capital cost of GBP 54.2 billion. PFI has ALOP and public/third party liability insurances during
the construction phase and material damage, business
predominantly been used for social infrastructure and
accommodation projects across a variety of sectors interruption and public/third party liability insurances
including health, defence, justice, education, social care, during the operational phase
waste and transport –– The principal subcontractors are required to take out PI
–– PFI contracts are typically for 25-30 years (although can be cover and any insurances required by law
for less or greater duration) and the public sector usually
pays for the asset on completion of construction on an
availability and performance based payment mechanism
–– The terms of the Project Agreement for PFI contracts
was standardised in 2001 and subsequently only
project specific amendments to the standard form
were permitted
–– Following the credit crisis in 2008, the Government
undertook a review of PFI which led, in December 2012,
to the Government’s introduction to a new approach in
England & Wales for involving private finance in public
infrastructure and services delivery called PF2
–– PF2 has introduced a number of reforms to the previous
PFI model which are designed to eliminate waste,
improve efficiency and transparency and to align public
and private incentives. In addition, alternative funding
structures and solutions are being considered. PF2 will
be utilised for accommodation and social infrastructure
projects and is currently being used for the Priority
Schools Building Programme (PSBP) led by the Education
Funding Agency
Legislation
–– The Public Contracts Regulations 2006 and EU
Procurement Rules
Sets out the competitive dialogue procedure for
PF2 projects
–– Housing Grants, Construction and Regeneration Act
1996 and Construction Contracts (England) Exclusion
Order 2011
Permits pay-when-certified clauses in PFI Construction
sub-contracts
–– Health and Safety at Work Act 1974 and other
construction and employment related legislation
–– HM Treasury guidance (including the Standardisation
of PFI Contracts (SOPC) and the Standardisation of
PF2 Contracts)
–– Sector specific legislation applicable to the relevant
PFI/PF2 project
85
 Construction pipeline
Energy infrastructure
• Clean Hydrogen Energy California, Kern County,
California
(Announced - completion due 2017)
• Huntington Beach Energy Project, Huntington Beach,
California
(Announced - completion due 2018)
• NextEra 1GW Solar Generation Facility, Blyth, California
(Announced - dates pending)
• Banner County Wind Farm 2000MW, Banner County,
Nebraska
(Announced - dates pending)
• Cape Wind Project, 450MW off-shore wind farm,
Massachusetts
(Announced - dates pending)
Transport infrastructure
• The New NY Bridge, New York
(Announced - completion due 2018)
• Crenshaw/LAX Transit Project, Los Angeles, California
(Announced - completion due 2019)
• California High Speed Rail
(Announced - completion due 2029)
• Baltimore Redline, Baltimore, Maryland
(Announced - dates pending)
• High Desert Corridor, California
(Announced - dates pending)
Social infrastructure
• UCSF Medical Center at Mission Bay, California
(Ongoing - completion due 2015)
• Atlantic Yards, Brooklyn, New York
(Phased construction programme under way)
• Transbay Tower and Transit Center, San Francisco,
California
(Phased construction programme under way)
86
United States of America
“Investing in a “Fix-It-First” policy: The national transportation system faces
an immense backlog of state-of-good-repair projects, a reality underscored by the
fact that there are nearly 70,000 “structurally deficient” bridges in the country
today. The President’s plan will put people to work as soon as possible on our
most urgent repairs. The President’s plan for USD 50 billion in frontloaded
transportation infrastructure investment would direct USD 40 billion towards
reducing the backlog of deferred maintenance on highways, bridges, transit
systems, and airports nationwide. For example, the President’s proposed
investments could bring almost 80 percent of structurally deficient bridges up to
date, getting Americans home faster and making the flow of commerce speedier.
Attracting private investment through a “Rebuild America Partnership”:
Creating a partnership with the private sector will create jobs upgrading what
our businesses need most – modern ports to move our goods; modern pipelines
to withstand a storm; modern schools worthy of our children. The President’s
plan will bring together an array of new and existing policies all aimed at
enhancing the role of private capital in U.S. infrastructure investment as a
vital additive to the traditional roles of federal, state, and local governments –
making American workers and businesses more competitive and putting more
Americans back on the job.”1
- The White House Blog, March 2013
Key industry bodies
• American Institute of Architects (AIA)
• Engineers Joint Contract Documents Committee (EJCDC)
• American Society of Civil Engineers (ASCE)
• American Council of Engineering Companies (ACEC)
• Association of General Contractors (AGC)
• Design Build Institute of America (DBIA)
Market facts
• USD 900 billion in annual expenditures
• 5.5% of the U.S. gross domestic product (GDP)
• USD 300 billion residential expenditures
• USD 270 billion public sector expenditures
• 5.7 million individuals employed
• Expected market growth between 2%-7% for fiscal year 2014
1 What You Need to Know About President Obama’s Plan to Improve American Infrastructure, The White House Blog,
March 2013
87
 Construction
Contractual issues
–– Each of the 50 states comprising the United States (U.S.)
maintains its own system of laws, administrative bodies,
and courts. The federal government of the United States
also maintains a system of laws, regulations, administrative
bodies, and courts. Contracts for construction are typically
subject to the laws and regulations of the jurisdiction of the
project location. However, with respect to the commercial
obligations between the parties, this general rule is often
amended by agreement
–– All of the states within the United States and the U.S.
Federal Government are common law jurisdictions with
the exception of Louisiana, which has its roots in the
Napoleonic Civil Code
–– The majority of projects utilize contracts based upon
standardized form agreements. The form agreements
used are largely dependent upon the project type,
location, industry served and the sophistication of the
parties. When form contracts are used between private
entities, they are often modified and negotiated. The
terms of contracts for public construction projects are
typically not negotiated. Some of the more common
industry forms are published by:
–– The American Institute of Architects (AIA)
–– The Engineers Joint Contract Documents Committee
(EJCDC)
–– The Design Build Institute of America (DBIA)
–– The ConsensusDocs Collation Council (ConsensusDocs)
–– Various methods of procurement are utilized within the
United States, including:
–– Design bid build (the traditional approach)
–– Design build
–– Construction manager at risk
–– Multi-prime
–– Integrated Project Delivery (IPD)
–– Public Private Partnership (PPP)
–– Most jurisdictions allow for the placement of mechanics
liens upon the property of the project in order to secure
payment. However, most jurisdictions also prohibit the
placement of mechanics liens on property owned by
the government
–– The majority of projects employ some level of surety
bonding. The typical arrangement requires the prime
contractor to post both performance and payment
bonds in amounts equal to the total value of the
contract. These bonds require a third party to assure
the obligations of the prime contractor. Performance
bonds assure that the contractor will complete the
project for the agreed upon price. Payment bonds assure
that the contractor will pay the amounts due to its
subcontractors
88
Legislation There are also a number of specialty insurance products
–– Construction projects are governed by the laws and utilized in the construction industry, including:
regulations of the jurisdiction of the project location and –– Owner Controlled Insurance Programs: known as an
by the applicable laws and regulations of the United States ‘OCIP’. Typically purchased by the owner, it provides
federal government project specific coverage for all parties involved in the
–– The United States is separated into fifty states, with construction project
each state separated into counties and further still into
local municipalities. Each of the states has independent –– Contractor Controlled Insurance Programs: known as a
legislation regulating most aspects of the construction ‘CCIP’. Very similar to an OCIP except that it is typically
industry including: construction standards; worksite purchased and administered by the prime contractor as
safety; labor compensation; environmental controls; opposed to the project owner
corruption; permitting; and, licensure. Many of the local –– Subcontractor Default: typically maintained by the prime
municipalities have similar regulations and all fall under contractor and protects the prime contractor from cost
the umbrella of federal mandates overruns arising from the default of its subcontractors.
–– Some of the more prevalent legislative and regulatory Typically used in lieu of obtaining performance bonds for
schemes include: subcontractors
–– The Davis Bacon Act (40 U.S.C. 3141 et seq) –– Cost Cap: typically issued on fixed priced remediation
projects and protects the contractor against cost overruns
–– Fair Labor Standards Act of 1938 (29 U.S.C. 201 et seq) on fixed-priced fixed-quantity projects
–– McNamara-O’Hara Service Contract Act of 1965 (41
U.S.C. 351 et seq) U.S. Construction projects also typically require the
prime contractor to provide surety bonding. Many public
–– Contract Work Hours and Safety Standards Act (40 entities are required by statute to require its contractors
U.S.C. 3701 et seq) to post bonds. Additionally, the U.S. Federal Government
–– Walsh-Healey Public Contracts Act (41 U.S.C. 35 et seq) mandates the use of bonds on federal construction
–– Copeland Anti-Kickback Act (40 U.S.C 3145) projects under the Miller Act.
–– False Claims Act (31 U.S.C. 3729 et seq) –– Performance bonds: assure the project owner that the
–– The Miller Act (40 U.S.C. §§ 3131–3134) prime contractor will complete the project for the agreed
–– The Federal Acquisition Regulations (Title 48 of the upon price
United States Code of Federal Regulations) –– Payment bonds: assure that the subcontractors and
Insurance suppliers on the project will be paid for their labor
and materials
Common types of insurance issued collateral to
construction projects include:
–– Builder’s Risk: also referred to as “All Risk Insurance” is a
first party property policy insuring damage to the works
during the course of construction
–– Commercial General Liability: protects the insured
against liability arising out of damage to the property of
third parties and against liability arising from personal
injury to third parties
–– Professional Liability: often called ‘Errors & Omissions’
or ‘E&O’ coverage protects design professionals and
those providing design services to the project from
liability arising from errors and omissions in the designs
furnished
–– Pollution: coverage for the discharge of pollutants is
typically excluded from the CGL policy
–– Workers’ Compensation: purchased by contractors
working on the project and provides all those employed
on the project with compensation in the event they
are injured
89
 PFI/PPP
Contractual issues
In the U.S., various contractual structures are available for PPP projects. There are two primary levels of contracting.
The first level occurs between the public entity and the lead private entity. The second level occurs between the lead
private entity and the design and construct team.
The typical finance structure for PPP projects in the U.S. is depicted below.2
Legislation
Similar to the discussion above, the enabling of PPP projects is governed by the statutes of the individual states. 33 states
and one U.S. territory have enacted legislation enabling the use of PPP as a procurement method. These states are depicted
below.3

Washington

Maine
North Dakota Minnesota
Public Sponsor
Oregon

Wisconsin
Massachusetts
Connecticut
Availability
Shared
payment Pennsylvania
revenue
or subsidy Nevada
Ohio
Equity Utah Illinois Delaware
Indiana West
Bonds, loans investments California Colorado Virginia
Virginia
Missouri

Lenders Concessionaire (SPV) Equity Investors North Carolina

Tennessee
Arizona South
Arkansas
Repayments Dividends Carolina

Georgia
Alabama
Funds to build,
Toll
maintain Mississippi
revenue Texas
and operate Louisiana
Alaska

Florida
Puerto Rico
Facility
Hawaii

The following arrangements are often employed between the public entity and the concessionaire: Insurance
–– Construction Phase: Insurance is typically provided consistent with construction industry standards (see above)
–– Finance only
–– Operational Phase: All risk coverage, commercial general liability coverage, completed operations coverage,
–– Finance, design and build
workers’ compensation coverage and pollution coverage are typically required
–– Finance, design, build, and maintain
–– Finance, design, build, maintain and operate
–– Finance, operate, and maintain
–– Concession

Generally, the lead private entity assumes the traditional responsibilities of the project owner and procures design
and construction. In procuring the design and construction on the project, the lead private entity typically uses the
following methods:
–– Design bid build
–– Design build
–– Multi-prime or
–– Integrated Project Delivery (IPD)

The contractual issues associated with each of these methods are the same as discussed above.

2 Establishing A Public-Private Partnership: A Primer, U.S. Department of

Transportation Federal Highway Administration, November 2012
3 State P3 Legislation, U.S. Department of Transportation Federal Highway
Administration, September 2013

90 91
 Key contacts
Our global projects & construction group comprises more than 30 partners working across six continents,
a number of which are listed below. For further information, please contact infrastructure@clydeco.com

Asia Pacific Europe & Russia Middle East The Americas

Australia France Kingdom of Saudi Arabia Brazil
David McElveney David Brown Ben Cowling Stirling Leech
Partner, Sydney Partner, Paris Partner, Riyadh Partner, Rio de Janeiro
T: +61 2 9210 4400 T: +33 1 44 43 89 71 T: +966 11 200 8817 T: +55 21 2217 7719
E: david.mcelveney@clydeco.com E: david.brown@clydeco.com E: ben.cowling@clydeco.com E: stirling.leech@clydeco.com
Beth Cubitt Greece Qatar Canada
Partner, Perth Alex McIntosh Laura Warren Robert Emblem
T: +61 8 6145 1720 Partner, Piraeus Partner, Doha Partner, Montréal
E: beth.cubitt@clydeco.com T: +30 210 417 0001 T: +974 4496 7416 T: +1 514 764 3650
Glen Warwick E: alex.mcintosh@clydeco.com E: laura.warren@clydeco.com E: robert.emblem@clydeco.ca
Partner, Perth Russia United Arab Emirates United States of America
T: +61 8 6145 1715
E: glen.warwick@clydeco.com
Maire Ni Aodha Mark Blanksby Joe Moore
Partner, London Partner, Dubai Attorney at Law, San Francisco
China/Hong Kong T: +44 20 7876 4782 T: +971 4 384 4553 T: +1 415 365 9826
Ian Cocking E: maire.niaodha@clydeco.com E: mark.blanksby@clydeco.com E: joe.moore@clydeco.us
Partner, Hong Kong Spain Michael Grose
T: +852 2287 2802 Partner, Dubai
E: ian.cocking@clydeco.com
Ricardo Garrido
Partner, Madrid T: +971 4 384 4544
Gilbert Kwok T: +34 91 793 45 02 E: michael.grose@clydeco.com
Partner, Hong Kong E: ricardo.garrido@clydeco.com Adrian Creed
T: +852 2287 2804 Partner, Abu Dhabi/Tripoli
E: gilbert.kwok@clydeco.com United Kingdom
T: +971 2 494 3501
John Morris E: adrian.creed@clydeco.com
Indonesia/Singapore Partner, London
Michael Horn T: +44 20 7876 4251
Partner, Singapore E: john.morris@clydeco.com
T: +65 6544 6553
Liz Jenkins
Africa
E: michael.horn@clydeco.com
Partner, London Libya
Eugene Tan T: +44 20 7876 4248 Adrian Creed
Partner, Singapore E: liz.jenkins@clydeco.com
T: +65 6544 6583
Partner, Abu Dhabi/Tripoli
E: eugene.tan@clydeco.com
Richard Moody T: +971 2 494 3501
Partner, London E: adrian.creed@clydeco.com
India T: +44 20 7876 6020
E: richard.moody@clydeco.com
Nigeria
Ishtiaq Ali
Grace Asemota
Partner, Clasis Law, Mumbai David Moore
T: +91 22 4910 0000
Legal Director, London
Partner, London T: +44 20 7876 4851
E: ishtiaq.ali@clasislaw.com T: +44 20 7876 4955 E: grace.asemota@clydeco.com
Jay Cheema E: david.moore@clydeco.com
Partner, Clasis Law, New Delhi Tanzania
Robert Meakin
T: +91 11 4213 0000 Peter Kasanda
Partner, London
E: jay.cheema@clasislaw.com T: +44 20 7876 4249
Legal Director, Dar es Salaam
T: +255 767 302 200
Mongolia E: robert.meakin@clydeco.com
E: peter.kasanda@clydeco.com
David Moore Anthony Albertini
Partner, London Partner, London
T: +44 20 7876 4955 T: +44 20 7876 4231
E: david.moore@clydeco.com E: anthony.albertini@clydeco.com
Robert Franklin
Legal Director, London
T: +44 20 7876 4242
E: robert.franklin@clydeco.com

92 93
 Our global projects & Leaders across all infrastructure classes globally
With over 150 infrastructure lawyers across six continents, we have an established

construction group
footprint across all infrastructure classes.
Commercial industrial projects
Spanning mature and emerging
markets, our lawyers ensure that
Our global projects & construction group advises across the whole industry, complex and high value projects,
with expertise in all infrastructure sectors and particular skill in applying the across all infrastructure asset classes,
are a success throughout all phases
developments in mature markets to assist both the private and public sectors of planning, delivery and operation.
in emerging territories. Whatever the size or complexity
of the project at hand, we mobilise
With significant capabilities in both the litigious and non-contentious aspects the critical mass and specialist
knowledge from across our network
of construction work, we offer clients a rounded perspective - whether at the front to deliver within the timescale,
end of developments or on the occasions when disputes occur. Where appointed budget and quality required.
as project counsel, our involvement enables issues to be resolved before they We advise on mid to large scale
transactional and contentious
develop into formal disputes or ensures that clients are well positioned should project requirements and offer a
disputes arise. comprehensive service with the
ability to advise both at the front
We apply a truly global perspective
and partner with energy investors,
sponsors, developers, contractors,
operators, suppliers and insurers.
Having developed a wholesale
understanding of the market, we
successfully leverage this knowledge
for the benefit of our clients.
Social infrastructure
Governments tasked with the
provision of social infrastructure
face distinct challenges inherent to
their socio-economic status and we
frequently advise both public and
private sector entities on projects,
from inception to completion and
beyond. On transactional project
elements, we advise across PPP/
Transport infrastructure
Applying first hand industry
knowledge and experience, our
global transport infrastructure group
has a proven track record across
airports, ports, rail and road and
understand the nuances across both
developed and emerging markets.
We deploy specialist lawyers for large
scale transport projects to provide
dedicated and bespoke client teams
adept at addressing challenges and
pursuing opportunities – from high-
speed rail networks in developed
countries to deepwater ports in
emerging markets.
We advise a broad range of market
participants on all stages of transport

“Due to its Infrastructure sector specialists

Construction Transport Our clients
end of developments or on the
occasions when disputes occur.
PFI transactions, project finance,
bespoke construction agreements and
infrastructure, including procurement
and financing (including PPP/
considerable development –– Airports –– Governments
Where appointed as project counsel,
our involvement enables risk to be
planning (amongst other disciplines)
and on the contentious side, we
PFI), construction, development,
operations and maintenance and
expertise in this –– Commercial
property
–– Ports
–– Rail
–– Sponsors
–– Main contractors
mitigated and issues to be resolved
before they develop into formal
resolve disputes using all forms of
dispute resolution including early
have a footprint that mirrors our
international client base. Moreover,
sphere the team –– Hospitality
–– Industrial
–– Road –– Consultants disputes, or ensures that clients are
well positioned should proceedings
settlement of claims, adjudication and
litigation.
our blend of transactional and
contentious strengths ensures that
–– Sub-contractors/
is often sought out –– Retail
Core skills
–– Project finance
suppliers commence.
We successfully deploy knowledge
clients receive the best possible

for particularly Energy

–– Power & utilities
–– Projects/
–– Corporate occupiers
–– Developers
Energy infrastructure gained in developed markets
to deliver projects in emerging
advice in one client-focused team.

concessions Demographic shifts and

complex matters, –– Oil & gas –– PPP/PFI –– Banks/funders unprecedented demand for energy economies and recognise that whilst
–– Insurers the range of physical facilities serving
both domestically –– Natural resources
–– Renewables
–– Procurement
–– Risk avoidance
and natural resources brings
both familiar and unprecedented communities are relatively consistent

and on the Social –– Contract drafting

international stage.”
Chambers UK, 2012
challenges to infrastructure
participants. Our team supports
globally, the obstacles to deliver and
maintain them are heavily influenced
–– Education
–– Healthcare
–– Construction
delivery
clients across the full life cycle of
these power & utilities, renewable
by domestic factors. In recognition of
this, our integrated team combines
–– Housing –– Construction energy, natural resources and oil international standards and regional
disputes and gas projects - supporting across knowledge and works closely with
–– Regeneration
–– International planning, funding (including PPP/ clients to deliver health, housing,
arbitration PFI), constructing, developing and education, recreation and other
operating to refinancing and sale, community services across the globe.
amongst others.

94 95
 Clyde & Co accepts no liability for loss
occasioned to any person acting or refraining
from acting as a result of material contained
in this guide. In particular (and without prejudice
to generality of the foregoing), nothing in this
guide should be construed as representative
by Clyde & Co LLP, that this guide accurately or
comprehensively states the current market in the
type of deals described in this guide. The content
of this guide does nor constitute legal advice and
should not be relied upon as such. Advice should
be taken about your specific circumstances.
Clyde & Co LLP is a limited liability partnership
registered in England and Wales. Authorised and
regulated by the Solicitors Regulation Authority.
© Clyde & Co LLP 2014

Clyde & Co LLP www.clydeco.com

CC003910 - March 2014